68
2018 ANNUAL REPORT DÖKTAŞ DÖKÜMCÜLÜK TİC. VE SAN. A.Ş.
2018ANNUAL REPORT
DÖKTAŞ DÖKÜMCÜLÜK TİC. VE SAN. A.Ş.
ContentsGüriş Group 2
Döktaş 3
Operations in brief 6
Message from Chairman of Board of Directors 7
Key Financials 8
Business Unit Results 9
Customer Segments 11
Board of Directors 12
Executives 13
Corporate Governance Principles Compliance Report 14
Statement of Responsibility 22
Auditor’s Report 23
2018 Consolidated Financial Statements 30
Contact Information 64
2
2018 ANNUAL REPORT
Güriş Group Founded in 1958 by İdris YAMANTÜRK, Güriş maintains to be one of Turkey’s leading groups with a presence in construction, industry, mining, tourism and energy sector.
Güriş has carried out business activities in Turkey, Middle East, Near and Central Asia, Commonwealth of Independent States and North African countries and has completed turnkey projects in a very wide range, namely in almost every field of the construction sector.
Group companies operating in construction are Güriş Construction and Engineering and Güriş Machinery and Assembly.
In tourism; Mirage Park Hotel and Mogan Aviation.
In mining; Santral Mining and North Cyprus Santral Mining.
In industry, under the parent company of Çelik Holding; Parsan Machinery Components, Omtaş Automotive and Transmission Components, Asil Çelik Industry and Trade, Güriş Construction Equipment and joined in 2018, Döktaş Dökümcülük.
In energy sector; Mogan Energy Investment and subsidiaries.
Generating around 1 billion Euro turnover, holding over 30 affiliates and with more than 7,000 staff Güriş Industry Group provides added value to Turkish economy.
Çelik HoldingEstablished in 1974, in order to contribute to national economy, especially to weigh on export-oriented investments, to support foreign capital inflows and to build know-how, brandname, trademark and industrial property rights. Çelik Holding incorporates Güriş Industry Group companies.
Share % Capital TL
Güriş Construction and Engineering
85.80% 102,988,588
Güriş Holding 11.70% 14,001,866
Parsat Makina Sanayii ve Pazarlama A. Ş.
2.50% 3,009,546
100.00% 120,000,000
3
Döktaş Döktaş Dökümcülük Ticaret ve Sanayi A.Ş. is a leading company in Turkey specialized in manufacturing of pig, ductile and aluminium castings supplied to automotive, heavy commercial vehicles, construction and agricultural machinery industry.
Founded in 1973 Orhangazi Iron Foundry maintains pig and ductile iron casting and machining capabilities and is Turkey’s largest iron casting plant.
In Manisa facilities, high and low pressure aluminium casting and aluminium wheel production activities are performed. Manisa Aluminium Plant is the 2nd largest aluminium casting facility for the automotive sector in Turkey, while Aluminium Wheel Plant is Turkey’s 4th largest aluminium wheel manufacturing facility.
In 1973, Döktaş Dökümcülük was established in Bursa Orhangazi in the name of Koç Holding. In December 2006 the company was acquired by Finnish Componenta Corporation. As of September 29 2017, the company’s shares were transferred to Döktaş Metal Sanayi ve Ticaret A.Ş. Subsequently on June 29, 2018, the company became a member of Çelik Holding. Company shares have been quoted on Istanbul Stock Exhange since 1986.
4
2018 ANNUAL REPORT
MISSION
Is to protect and strengthen our position as a reliable and leading company preferred as a supplier of cast iron, light alloy aluminum casting and rims.
VISION
Is to be a world scale reliable business partner that creates innovation, solutions and opportunities in casting industry.
5
As of 31.12.2018, our company’s registered capital is 250.000.000 TRY, the issued share capital is 66,844,800 TRY. Capital share of the shareholders who own more than 10% of paid-in capital are as follows:
% Capital TL
Çelik Holding A. Ş. 96.49% 64,496,887.83
Public shares 3.51% 2,347,912.17
100.00% 66,844,800.00
SUBSIDIARIES & ASSOCIATES
Company name Field & Operation Capital Share
Kumsan Döküm Malzemeleri Sanayi ve Ticaret A.Ş./Turkey
Foundry sand production & trading
1,200,000 TL 25.10%
Döktaş Trading UK Limited/United Kingdom Import& Export 287,850 GBP 100%
CAPITAL STRUCTURE AND AFFILIATES
6
2018 ANNUAL REPORT
Operations in brief
Revenues
Sales by Country
EBITDA
Manisa Wheels Production %14
Manisa AuminiumFoundry %16
Orhangazi Iron Foundry %70
208 MEUR
2018 2017
259 MEUR
30
33
146
38
43
178
Döktaş consists of three business units; Iron Foundry in Orhangazi, Aluminum Foundry andWheels Production facility in Manisa.
Manisa Wheels Production %11
43 MEUR
2018 2017
43 MEUR
Manisa AuminiumFoundry %12
Orhangazi Iron Foundry %77
5
5
33
8
7
28
Rest of the world
France
USA
Germany
Italy
Sweden
UK
Turkey
25%20%15%10%5%0%
6%
5%
14%
16%
16%
23%
17%
3%
208 MEUR
Sales by Customer Segment
HeavyTrucks30%
Construction& Mining24%
Automotive28%
Agriculture14%
MachineBuilding
4%
208 MEUR
7
Message from Chairman of Board of Directors
Dear Shareholders,
We present to you the information on the Annual Report of the activities and accounts of Döktaş Dökümcülük Ticaret ve Sanayi A.Ş. for the year 2018.
2018 has been a difficult period for our country and worldwide. In addition to the risks associated with our region, Brexit process ongoing in Europe, trade disputes the US escalated over Russia, China and Iran, growing political and economic tensions have also negatively affected Turkey’s economy as it affects the global economy.
Political tension between Turkey and the US led Turkish Lira to over depreciate against US Dollar and other core currencies as well as causing deterioration on macro economic indicators.
2018 was the year of transformation for Döktaş and a new era was found. The shares of the company, which had hard times in 2017 due to financial difficulties experienced by previous parent company Componenta OYJ, were transferred to Döktaş Metal.
During the first half of 2018, the transfer of company shares to a strong investor, which was initiated by Döktaş Metal and IS Investment, resulted with the assignment of shares to Çelik Holding and completed with mandatory tender offer.
Leading in the sector, according to the results of 2017 top 500 companies of Turkey ranked to 152nd in terms of net sales, 5th in Bursa and 44th across Turkey with regards to 204 million USD export volume, our company creates added value to Turkey’s economy by generating employment to around 2,300 people.
We aim to make Döktaş a worldwide brand with the mission of ”Growing while maintaining our credibility over the individuals and companies we do business and cooperate with” and through new investments, sales strategies and Güriş Group synergy that will contribute to Turkish industry and export.
We have faith in that the synergy created with the Güriş Industrial Group companies; Parsan, Omtaş and Asil Çelik will carry Döktaş one step further in terms of customer relations, new markets and other technical issues.
On behalf of myself and esteemed members of Board of Directors, I would like to express our sincere thanks to our staff in all levels of duty who are always working with dedication, to all domestic and foreign organizations that support us by cooperating during rough times.
I hereby submit the Board of Directors, Independent Auditors and Audit Committee Reports and Balance Sheet and Income Statements to your approval with the belief that our efforts in 2018 and the results we have gained will be approved by your delegation.
I wish that the decisions you will make will bring happiness and success to our country, our group, all institutions and members we work with by giving us strength in our future works.
Regards,
Tevfik Yamantürk
Chairman of Board of Directors
8
2018 ANNUAL REPORT
2018 2017 2016 2015 2014
ORHANGAZİ IRON FOUNDRY BUSINESS UNITCapacity (tons) 150,000 150,000 150,000 170,000 170,000
Production (tons) 96,665 112,236 96,766 106,830 109,115
Sales (M TRY) 827.3 733.7 461.1 511.7 519.5
Operating profit (M TRY) 166.9 94.2 -14.9 49.7 35.3
MANİSA ALUMINIUM DIE CASTING BUSINESS UNIT
Capacity (tons) 14,400 14,400 12,400 10,875 10,500
Production (tons) 6,558 8,645 7,839 8,192 7,144
Sales (M TRY) 184.7 177.6 131.1 134.8 111.9
Operating profit (M TRY) 13.6 17.2 16.1 11.0 8.0
MANİSA WHEELS BUSINESS UNIT
Capacity (units) 1,440,000 1,440,000 1,440,000 1,440,000 1,440,000
Production (units) 730,631 883,894 1,044,244 1,332,342 1,291,000
Sales (M TRY) 167.8 155.1 130.9 155.1 128.5
Operating profit (M TRY) 22.5 29.5 26.8 20.1 14.5
DÖKTAŞ DÖKÜMCÜLÜK A. Ş. Total
Sales (M TR Y) 1,180 1,066 723 802 760
Operating profit (M TRY) 203.0 141.0 28.0 80.8 57.8
Export (M EUR) 160.7 184.5 176.8 197.0 204.0
Import (M EUR) 32.8 30.6 32.2 49.5 42.7
Investments (M EUR) 5.9 5.2 18.5 26.6 12.7
Number of personnel 2,260 2,521 2,462 2,660 2,601
Orhangazi 1,521 1,629 1,589 1,748 1,769
Manisa 739 892 873 912 832
DÖKTAŞ DÖKÜMCÜLÜK A. Ş. Total (M TRY)
Net sales 1,180 1,066
EBITDA 245 178
Earnings before tax 110 77
Net profit 101 68
Total assets 1,360 1,049
Total liabilities 1,231 1,001
Equity 129 48
Current ratio 0.54 0.80
Leverage ratio 0.91 0.95
ST financial debt / Total financial debt 0.53 0.25
Net financial debt / Equity 7.66 16.58
EBITDA margin 21% 17%
ROCE (*) 30% 20%
(*) Return on capital employed
Key Financials
9
Business Unit ResultsConsolidated net sales of Döktaş decreased to 208 MEUR in 2018 from 259 MEUR in 2017. The 20% decline in business volume is due to the narrowing mainly in domestic market.
Total number of personnel consist of 312 white collars and 1,948 blue collars (including leased personnel) in 2018 whereas, 242 white collars and 2,279 blue collars (including leased personnel) in 2017. The headcount decreased by 261 employees – in net representing 10% of the total.
Döktaş consists of three business units; Iron Foundry in Orhangazi, Aluminum Foundry and Wheels production facilities in Manisa. In addition, we have a 100% owned subsidiary, Döktaş Trading UK Ltd, which is carrying out commercial activities in the UK and a 25% owned associated company, Kumsan Döküm Malzemeleri A.Ş, a foundry sand manufacturer located in Turkey.
Compared to 2017 the share of automotive business area in total sales decreased from 32% to 28% in 2018, whereas the share of agricultural machinery decreased from 17% to 14%. The share of construction and mining increased from 21% to 24%. On the other hand, the share of machine building remained 4% as the same as previous year and the share of heavy trucks increased from 25% to 30%. 70% of total sales were generated from Orhangazi business unit and 76% of Döktaş sales refers to export operations.
Orhangazi Iron FoundryCompared to 146,7 MEUR of net sales in 2017, Orhangazi Iron Foundry realized 133,8 MEUR sales revenue in 2018 with a 8.8% decrease. Exports accounted for 77% of the sales while the remaining 23% represents domestic sales.
Number of machined parts reached to a level of 25% and 45,6 MEUR of the sales was generated from those parts during 2018. In the coming periods, it is aimed to enhance the added value by increasing the share of machined parts.
The year 2018 was a year of savings for Orhangazi Plant, which provided efficiency increase and cost control in all areas. On the other hand it was a year of recovery for new projects. With the synergy of Güriş Industry Group, new customers and project proposals increased significantly compared to previous years.
Within the scope of occupational health and safety activities, work environment improvements and 5S activities continued.
2019 will be a period in which intensive work will be spent on scrap and cost improvements, efficiency growth, savings and integration of new projects and investments.
Manisa Aluminium Foundry2018 will be referred to as the beginning of a period when a new culture and approach dominated the company as of June, when we became a part of the Güriş Industrial Group. Net sales realized as 43,1 MEUR in 2017 decreased to 32,5 MEUR in 2018. Due to the risk perception of the automotive sector, downsizing was inevitable.
On the other hand, existing customer relations in Güriş Industry Group companies created the opportunity to bring new business to Aluminyum Facility, warm relations with potential customers have been caught and technical meetings arranged for new projects. In the current projects, sampling phase has been reached and transition to mass production will be provided by the end of 2019.
Also, it is pleasing that some products produced in the Aluminum Plant in the past have returned to Manisa after 3 years. Those parts are expected to generate approximately 5 MEUR additional revenue for 2019.
While the capacity utilization rate of Aluminum Plant is relatively low in high pressure casting, it can be said that demand in low pressure casting technology has increased. When evaluating our investment plans for the coming years, market demands are also taken into consideration. Accordingly, our activity in truck parts is likely to increase in the coming years.
10
2018 ANNUAL REPORT
We would like to indicate that as of 2019, lean production trainings for all employees will resume, 5S and Kaizen activities are the primary targets of this year. Since the results of improvements realized during 2018 in scrap rate, cycle times and heat treatment furnaces were observed in a concrete manner.
For Aluminum Foundry 2019 is seen as the beginning of a period in which new customer relations were captured and revenue in existing customers increased further. We believe that our position as a business partner for our customers and industry leader will be further strengthened.
Manisa WheelsThe year 2018 started under the roof of Döktaş was a year in which our operations re-entered into a new and stronger structure with the participation to Güriş Industrial Group.
Order fluctuations started in the last quarter of 2017 continued in 2018 and negatively affected the Wheels Business Unit targets. In order to compensate the contraction in after market, process and quality improvements were put into use and efforts to reduce costs were accelerated, by sustaining the profitability 2018 was completed with a 29,6 MEUR turnover.
Workflow improvements have been implemented with new investments, new business plans, and arrangements within the facility.
In the last quarter of 2018, relations with new customers were concluded positively and the projects were mass-produced. The business opportunities presented by the synergy created with Güriş Industry Group are in progress and the products of these works will be obtained in the near future.
Lean manufacturing trainings have been started at the end of 2018 in order to increase the efficiency of operations and the knowledge level of our workforce as well as customer satisfaction.
By using lean manufacturing techniques and through quality and workflow improvement projects, in 2019 we aim to be a reliable business partner that creates innovative solutions and opportunities and to increase our capacity utilization rate with new customers to be added to the portfolio.
11
Customer Segments
Provides iron and aluminum cast parts and light alloy wheels in a wide range of products for the automotive industry including passenger car and light commercial vehicle manufacturers. DJ Wheels and MAXX brands are produced in Manisa Wheels Business Unit. Tofaş, Gruner, ThyssenKrupp, Ford Otosan, Ford of Europe, Renault, PSA, ATU, Borbet, OZ and R.O.D Wheels are some of our customers in this segment.
Customers include construction machinery, bucket, crane, excavator and damper manufacturers. Döktaş supplies various components for engines, power transmissions and chassis. Caterpillar, JCB, Volvo Construction Equipment and Carraro Drive Tech are some of our customers in this segment.
Pumps, concrete breakers and hydraulic motor cast iron parts are supplied to lift, robot and various crane manufacturers. ABB, Cummins, Kone, Atlas Copco and ZF Friedrichshafen AG are some of our customers in machine building segment.
For heavy truck industry Döktaş manufactures ready-to-install components used in the chassis, engines, axles, transmissions and brakes. We offer all parts of the supply chain from product engineering and manufacturing to surface treatment, painting and pre-assembly. Customers in heavy trucks segment include Iveco, Ford Otosan, Daimler, Scania, Volvo and Mercedes Benz.
Various casting components are supplied for agricultural equipment such as tractors, forestry machinery and combine harvester manufacuters. Türk Traktör Fabrikası, New Holland, Tümosan, AGCO Grup, Claas, Valtra, Gima and Raba are some of our customers in this segment.
AUTOMOTIVE (% 28)
AGRICULTURE (% 14)
CONSTRUCTION& MINING(% 24)
HEAVY TRUCSK(% 30)
MACHINE BUILDING
(% 4)
12
2018 ANNUAL REPORT
Board of Directors
Tevfik YAMANTÜRK Chairman of Board
Orhan METİNMember of Board
Yaylalı GÜNAY Deputy Chairman
Hasan Basri AKTANIndependent Member of Board
Dr. Mehmet Tahir VARLIKMember of Board
Alpaslan AKTUĞMember of Board
Atilla ZEYBEKIndependent Member of Board
Dr. Esat Kemal YEĞENOĞLUMember of Board
Ömer Lütfi ERTENIndependent Member of Board
13
Executives
Sabri ÖZDOĞAN Managing Director
Sibel BİNİCİCFO
Yusuf ÇAMURDirector, Orhangazi Business Unit
İbrahim KeyifDirector, Orhangazi Business Unit Maintenance & Investments
Güngör ÇETİNDirector, Aluminium Casting Business Unit
Önder SÖNMEZDirector, Aluminium Wheels Business Unit
Uğur DEMİRCİDirector, Orhangazi Business Affairs
Kai BECKMANNDirector, Manisa Aluminium Sales
14
2018 ANNUAL REPORT
Corporate Governance Principles Compliance Report
1. Report for Compliance with Corporate Governance Principles
Pursuant to the Communique dated 30 December 2011 and Serial: IV, No: 56 Regarding the Determination and Application of Corporate Governance Principles (the “Communique”), the companies listed on Borsa İstanbul A.Ş. (“BIST”) are obliged to comply with some of the principles set forth in the Annex of the Communique. Finally, Corporate Governance Legislation (II-17.1) has been entered to force dated 3 January 2014 by Official Gazette No:28871.
Döktaş Dökümcülük Tic. ve San. A.Ş. (“the Company”) always efforts to comply with the Capital Markets Board’s (“CMB”) Corporate Governance Principles. The Company has adopted the principles of equality, transparency, accountability and responsibility of the Corporate Governance Principles published by CMB. The “Corporate Governance Principles” as stipulated by the Capital Markets Board are also observed by the Company and these universal principles are implemented by Döktaş Dökümcülük Tic. ve San. A.Ş.
SECTION I
SHAREHOLDERS
2. Investor Relations
Relations with the shareholders at Döktaş Dökümcülük Ticaret ve Sanayi A.Ş. are carried out by the responsible unit established under the Treasury department. Investor Relations department responsible contact information is given below:
Sibel BİNİCİ CFO([email protected] /02245734263-8107)
The activities of Investor Relations are as follows:
- Promotion of the company to the individual and corporate investors and informing the potential investors and shareholders.
- Responding information requests of the undergraduate, graduate students the lecturers of the universities making researches on our company and the sector.
- Holding the general assembly meeting of the company, preparing of the documents that may be useful for shareholders and submitting the minutes to the demanding persons.
- Informing our shareholders.
- Submitting Material Disclosures to Public in accordance with the communiqué of Capital Markets Board Series II-15.1.
- Making preparation for meeting prior to General Assembly, preparing the respective documentation and obtaining the preliminary permits for amendment of the articles of association and presenting the same to General Assembly for approval.
- Following up the amendments in the legislation concerning the Capital Market Law and informing the respective units of the company about such amendments.
- Following up and keeping records of the decisions of the Board of Directors and the Committee.
- Representing and communication of the company with other institutions such as CMB, BIST, Takas Istanbul and Central Registry Agency.
During the fiscal period nearly 40 verbal and written questions were submitted to the department and they were answered according to the legislation.
3. Exercise of Shareholders Right to Obtain Information
All shareholders are equally treated under Döktaş Dökümcülük Ticaret ve Sanayi A.Ş. in exercise of right
15
to obtain and review information. In order to expand the shareholders’ right to obtain information, any information that may affect the exercise of the rights is made available to the shareholders in electronic media. All of the questions directed verbally or written has been answered. Notifications of our Company to BIST are also sent via electronic signature. Additionally, membership of the Central Registry Agency, which was established to monitor capital market instruments, was completed and an important step was taken in dematerializing the stocks. The Company website (www.doktas.com) contains the following financial statements as well as many other information;
- Articles of association
- Company policies
- All declarations regarding to General Assembly Meeting
- Material disclosures
- Shareholding structure of the company
- Information on members of the Board of Directors and
senior management of the company
- Financial announcements and calendar
- Financial statements and annual reports
Request for the appointment of a special auditor does not exist in our Articles of Association as an individual right. No request has been received from our shareholders in this regard. For 2018 it has been decided and voted in General Assembly Meeting that KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. will be our company’s Independent Audit Firm.
4. General Assembly Meeting
The Ordinary General Assembly meeting to discuss the activities of our Company in 2018 is planned to be held on a date to be determined by the Board of Directors after the financial statements are published in PDP.
Invitations to the General Assembly meeting are made by the Board of Directors as per the provisions of Turkish Commercial Code, Capital Market Law and company’s articles of association. Public is informed by notifying the Borsa İstanbul , Public Disclosure Platform and Central Registry Agency immediately after the Board of Directors’ decision to hold the General
Shareholders’ Meeting. Also the venue, agenda of the General Assembly meeting, amendment drafts for the articles of association and proxy forms are published via all kinds of communication tools including electronic communication and announcements made on the Turkish Trade Registry Gazette and newspapers published in the area where the company headquarters is located at least three weeks prior to the General Assembly. This announcement states where the financial statements for the period that have undergone independent audit may be examined.
In addition, the information specified in the mandatory Corporate Governance Principles is being placed on the website of the company along with the general assembly meeting announcement and other notifications and declarations to be made in accordance with the relevant legislation.
A shareholder can take the floor in the General Assembly, voice his views about the company activities, provide questions to the company management to demand information and his question is answered. Our General Assembly is held under the supervision of a Government Commissioner from the Ministry of Industry and Commerce. The suggestions put forward by the shareholders of the company holding control interest were taken into consideration in 2018 General Assembly. The minutes of the General Assembly are available in our website. In addition, these minutes are made available to the shareholders for examination purposes at the headquarters of the company. In accordance with provisions of the Regulation on Electronic General Assembly Meetings of Joint Stock Companies published on the Official Gazette dated 28 August 2012 and numbered 28395 and entered into force on 1 October 2012 as per article 1527 of the Turkish Commercial Code numbered 6102, necessary actions in relation to attendance of shareholders to general assembly meetings through electronic means, declaration of opinions, raising propositions and casting votes are provided through the electronic general assembly system provided by the Central Registry Agency.
Ordinary General Assembly of the Company was held on April 10, 2018 and Extraordinary General Assembly was held on 29.06.2018. The results of the General Assembly meeting were published on the Company’s website
16
2018 ANNUAL REPORT
(www.doktas.com) under the Investor Relations tab and in the PDP notifications.
5. Voting Rights and Minority Rights
For the exercise of voting rights in our company there is no privilege in our Articles of Association and there is no legal entity that is our subsidiary among our partners. In addition, shareholders may participate in the General Assemblies with the proxy given to other shareholders or non-shareholders.
6. Profit Distribution Policy and Profit Distribution Timing
A balanced and consistent policy is followed between the interests of the shareholders and the interests of the Company in accordance with the Corporate Governance Principles.Our Company makes profit distribution decisions in accordance with the Turkish Commercial Code, Capital Markets Legislation, Capital Markets Law (CMB), Capital Markets Board (CMB) Regulations and Decisions, Tax Laws, other relevant legal regulations and Articles of Association and General Assembly Decision.Accordingly;
1. In case of not distributing the net distributable profit for the period calculated in accordance with the Capital Market Legislation or distributing profit at a minimum of 5%,the financial structure and budget of our company are taken into consideration in determining the profit distribution ratio.
2. Investments that require significant fund outflow to increase our company value, important issues affecting our financial structure and uncertainties that may arise in the economy, markets or other areas beyond the control of our company are taken into consideration by the Board of Directors in making profit distribution decisions.
3. The profit distribution proposal shall be disclosed to the public in accordance with the regulations of the CMB taking into consideration the legal periods.
4. Dividend distribution is accepted to be commenced as soon as possible following the General Assembly meeting where the distribution decision has been made. Although the dividend will be distributed to shareholders
on the date determined by the General Assembly within the specified legal periods.
5. Our Company makes profit distribution decisions in accordance with the Turkish Commercial Code, Capital Markets Legislation, Capital Markets Law (CMB), Capital Markets Board (CMB) Regulations and Decisions, Tax Laws, other relevant legal regulations and Articles of Association and General Assembly Decision.
6. In case the Board of Directors proposes to the General Assembly not to distribute the profit, the shareholders are informed at the General Assembly regarding the usage of the undistributed profit.
As stated in the Corporate Governance Principles Compliance Report of the previous year and the Minutes of the General Assembly Meeting, Dividend Distribution Policy is determined in comliance with the relevant articles, regulations and practices of the Turkish Commercial Code and the Capital Markets Law, as well as the medium and long term strategies and investment and financial plans of our company.Our Dividend Distribution Policy, determined in this direction, is presented for the information of the shareholders and the public in both the Annual Report and the General Assembly of Shareholders.
7. Transfer of Shares
The Articles of Association do not contain any practices that make it difficult for shareholders to freely transfer their shares and provisions that restrict the transfer of shares.
SECTION II
PUBLIC DISCLOSURE AND TRANSPARENCY
8. Company Disclosure Policy
In line with the principle of public disclosure and transparency, our company aims to provide accurate, complete, comprehensible, analyzable and easily accessible information to the relevant parties in a timely manner.It is ensured that all information demanded is evaluated, only if such information is not a confidential commercial
17
information. Disclosure of material events is made in writing and by electronic signature using BIY over the Public Disclosure Platform. Such disclosures shall be disclosed to the public in a timely manner within the period determined by the legislation.In 2018, in addition to the ordinary notifications, 64 material event disclosures were made by our company. Since our Company is not listed on foreign stock exchanges, no Material Event Disclosure is required except CMB and BIST. Material Disclosures were made within the period stipulated by the law. Respectively no sanctions were imposed by the CMB.
9. Website of the Company and its Contents
Our company website is www.doktas.com. The Company actively uses the corporate website as stipulated by the CMB Principles in order to maintain its relations with shareholders more effectively and rapidly, and to maintain constant communication with shareholders. The information contained here is constantly updated and made in accordance with the relevant legislation and does not contain conflicting or incomplete information.
10. Annual Report
The Company’s Board of Directors prepares its Annual Report in accordance with the legislation and corporate governance principles in order to ensure that the public is able to obtain complete and accurate information about the company’s activities.Our corporate presentation, products and services, our management systems and the information listed in Section II Article 1.11.5 of the Capital Markets Law Corporate Governance Principles are available on our website. CMB Corporate Governance Principlesinformation is included in the Annual Report.
SECTION III
STAKEHOLDERS
11. Disclosure to StakeholdersPartners:Pursuant to the stock exchange communiqués and
the provisions of the Turkish Commercial Code the Company announces issues such as general assembly meetings, capital increases, dividend distribution to the stakeholders in the Trade Registry Gazette and Material Disclosure.
Customers:In line with the importance attached to service and product quality, the Company continues its activities to improve customer satisfaction. Customer satisfaction is measured by regular surveys. Trainings and seminars for customers are planned and held regularly. In addition, research and development activities are continuing.
Personnel:
All kinds of practices related to employees are carried out in accordance with the laws regulating the working life. Recruitment, promotion, training and performance improvement policies and various practices for employees are determined in writing. The Company communicates clearly with employees on matters related to occupational health and safety. Employees are also informed through meetings, seminars and trainings held in their fields of expertise and general interest. Stakeholders learn about the Company’s developments through disclosures made to the public in accordance with the relevant legislation.
In addition, stakeholders can communicate with the Corporate Governance Committee, Audit Committee or Investor Relations Department by telephone and / or e-mail regarding the Company’s unethical transactions.
Stakeholders of the Company are invited to meetings as required and informed via telecommunication tools.
Relations with our employees within the scope of Labor Agreement are carried out through union representatives. Our company is a member of MESS (Union of Turkish Metal Industrialists) as an employer union and the blue-collar employees of our company are members of the Turkish Metal Union. In January 2018, a collective labour agreement was signed between MESS and the Turkish Metal Union for the period of 01.09.2017-31.08.2019.
12. Stakeholders’ Participation to the Company Management
The decisions are taken together with the trade union
18
2018 ANNUAL REPORT
regarding the implementation of the stakeholders participation in management, activities carried out, working conditions and rights provided to the employees.
13. Human Resources Policy
The criteria for recruitment and promotion mechanism have been determined written in human resources policy of our company. Our most important strength is our experienced, knowledgeable, enthusiastic and highly qualified human resources.
Our aim as Human Resources process is;
- The right person for the right job
- Equal pay for the equal job
- Merit associated with success
- Equal opportunity for all for continuously improving the competencies of our workforce and maintaining our permanent superiority in the global competitive environment. The functioning of the human resources systems determined for this purpose is defined by the procedures and announced to all employees.
Employee satisfaction is measured with surveys and areas that need improvement are determined and remedial measures are taken. A representative has not been appointed to conduct relations with employees other than union workplace representatives designated under the collective labor agreement. This function is mainly carried out by the Human Resources Department. There were no complaints from employees in particular regarding discrimination.
14. Ethic Rules and Social Responsibility
Activities are organized according to the criteria of corporate social responsibility and impact on the society. Information about our projects performed during the period are on our website. Corporate values include institutionalism, transparency and sustainability. In this context, we reflect our values in our daily work in the following ways:
• In all our activities, we act in compliance with ethical rules, laws and corporate governance principles, respecting the environment, and respecting occupational health and safety principles.
• We communicate with all our stakeholders in a
transparent, open and trust-based manner.
• We ensure continuity in all our processes and take into account the effects of our actions on the environment and society.
Our ethical policy approved by the resolution of the Board of Directors has been published in the human resources tab of our website.
SECTION IV
BOARD OF DIRECTORS
15. Structure and Formation of the Board of Directors
The majority of the members of our Board of Directors are non-executive members of the company. These members include independent members who are able to perform their duties without being influenced under any circumstances. The number and qualifications of the independent members of the Board of Directors are determined according to the regulations of the CMB regarding corporate governance. The procedures set forth in the said regulations are followed in the appointment of independent members of the Board of Directors. Following the General Assembly meetings in which the members of the Board of Directors are elected, the Chairman and the Deputy Chairman are determined regarding the distribution of duties. If there is a vacancy in the memberships of the Board of Directors during the period, the provisions of Article 315 of the Turkish Commercial Code shall apply.
As per Turkish Commercial Code Article 395 & 396, the approval of the General Assembly is taken for the chairman and members of the board of directors to carry out the business that are in the scope of the company in person or on behalf of others and to become partners in the companies that do such works. The background of the members of the Board of Directors are available on the website.
The Board of Directors consists of the following persons:
Tevfik YAMANTÜRK Chairman of Board, non-executive member
Yaylalı GÜNAY Deputy Chairman, executive member
19
Dr. Mehmet Tahir VARLIK Member of Board, executive member
Dr. Esât Kemâl YEĞENOĞLU Member of Board, non-executive member
Alpaslan AKTUĞ Member of Board, non-executive member
Orhan METİN Member of Board, non-executive member
Hasan Basri AKTAN Independent Member of Board
Atilla ZEYBEK Independent Member of Board
Ömer Lütfi ERTEN Independent Member of Board
Duties carried out by Members of the Board of Directors:
Tevfik YAMANTÜRK-Chairman of Board
A member of Board of Directors in the Güriş Group companies.
Yaylalı GÜNAY-Deputy Chairman
Served as a consultant and board member in many companies operating in the foundry sector.
Dr. Mehmet Tahir VARLIK-Member of Board
CEO and Board Member of Güriş Industry Group companies (Parsan, Omtaş).
Dr. Esât Kemâl YEĞENOĞLU-Member of Board
A member of Board and Senior Management Consultant at Güriş Group companies; Asil Çelik and Omtaş Otomotiv.
Alpaslan AKTUĞ-Member of Board
A member of Board at Güriş Group companies.
Orhan METİN-Member of Board
A member of Board at Güriş Group companies and Founding Chairman of DÖVSADER
Hasan Basri AKTAN-Independent Member of Board
A member of Board at Güriş Group companies.
Atilla ZEYBEK-Independent Member of Board
The founder partner and Chairman of the Board of Directors of As Finansal Danışmanlık Tic.Also a member of Board at Güriş Group companies.
Ömer Lütfi ERTEN-Independent Member of BoardDo not perform any duties other than the membership of Döktaş Dökümcülük Board of Directors.
The Members of the Board of Directors declared that there has not been a direct and indirect interest relationship in terms of employment, capital or trade within the last 10 years of Döktaş or one of its affiliates or in-group companies and of the person, spouse and blood relatives and have not taken part in the independent audit process within the last 6 years.
16. Fundamentals of Activities of the Board of Directors
The agenda of the meetings of the Board of Directors is determined by information from relevant units to senior management and members of the Board of Directors of the matters that the Company’s Articles of Association explicitly order to be resolved by the Board of Directors. Additionally the agenda of the meeting is determined when any of the members of the Board of Directors notifies the senior management about the decision to be taken on a specific issue. The matters to be discussed in the Board of Directors meeting are collected and consolidated in the Finance Department and the agenda is formed. Finance Department has been appointed to determine the agenda of the meetings of the Board of Directors of Döktaş Dökümcülük, to prepare the decisions of the board of directors, to inform the members of the board and to ensure communication.
The Board of Directors takes decisions to the extent required by the business and to the minimum number determined by the articles of association.
CMB’s corporate governance regulations shall be complied with in all transactions where the corporate governance principles are deemed important, in all related party transactions of the company and in the transactions regarding the issuance of collaterals, pledges and mortgages in favor of third parties.The responsibilities of the members of the Board of Directors are clearly defined in the articles of association of the company. The authorities are detailed in the signature circular of the company. The different opinions and the reasons for opposing votes arising at the meetings of the Board of Directors are recorded in the meeting minutes
20
2018 ANNUAL REPORT
book. However, this kind of opposition or dissenting opinion has not been publicly disclosed.
17. Number, Structure and Independence of the Committees established under the Board
The Board of Directors manages and represents the company by taking into consideration the long-term interests of the company with a rational and prudent risk management approach by keeping the risk, growth and return balance of the company at the most appropriate level through strategic decisions to be taken. The Board of Directors determines the human and financial resources required by the company in line with the strategic goals of the company and audits the performance of the management. The Board of Directors is responsible for overseeing the compliance of the Company’s activities with the legislation, articles of association, internal regulations and policies established. The formation and election of the Board of Directors is carried out in accordance with the corporate governance principles and the relevant principles are included in the articles of association. As determined by the articles of association of the Company, one third of the members are independent board members as defined in the CMB’s Corporate Governance Principles. Detailed explanations regarding the committees of the board of directors determined in accordance with the articles of association are given below.
Corporate Governance Committee; has determined whether the corporate governance principles have been applied in the company, if not, the reasons and conflicts of interest arising from non-compliance with these principles, provided remedial recommendations to the board of directors and supervised the work of the investor relations department. The Chairman of the Corporate Governance Committee is elected among the independent members in accordance with the corporate governance principles. It meets as often as needed, at least twice a year. Since no separate Nomination Committee and Remuneration Committee is established in the current structure, the Corporate Governance Committee also fulfills the duties of these committees. The members of the Corporate Governance
Committee are;
Chairman Atilla ZEYBEK Member Nuri OKUTAN Member Ömer Lütfi ERTEN Member Sibel BİNİCİ
Early Detection of Risk Committee; is responsible for early identification of risks that may endanger the existence, development and maintenance of the company, taking measures and managing risk. It reviews risk management systems at least 4 times a year. Committee members are as follows.
Chairman Atilla ZEYBEK Member Hasan Basri AKTAN Member Kemal YEĞENOĞLU Member Ömer Lütfi ERTEN Member Yaylalı GÜNAY
Audit Committee; carries out activities to monitor and assist the healthy functioning of internal audit activities, to make arrangements for independent audit activities, to select the audit firm and to review the auditor reports.
Chairman Hasan Basri AKTAN Member Atilla ZEYBEK Member Ömer Lütfi ERTEN
8. Risk Management and Internal Control Mechanism
The Board of Directors conducts its activities in a transparent, accountable, fair and responsible manner. The Board of Directors set out management, information system and processes that can minimize the risks that may affect stakeholders, especially the shareholders, by taking into consideration the opinions of the relevant committees.
The Early Detection of Risk Committee, which was formed among the members of the Board of Directors, convened 4 meetings during 2018.
The Risk Management Committee advises the Board of Directors to determine all kinds of strategic, financial and operational risks that may affect the company, to calculate the effects and probabilities, to manage and
21
report the risks in line with the company’s profile, to implement the necessary measures and to establish effective internal control systems accordingly.
19. Strategic Goals of Company
The Board of Directors manages and represents the company by taking into consideration the long-term interests of the company with a rational and prudent risk management approach by keeping the risk, growth and return balance of the company at the most appropriate level through strategic decisions to be taken. The Board of Directors determines the human and financial resources required by the company in line with the strategic goals of the company and audits the performance of the management. The Board of Directors is responsible for overseeing the compliance of the Company’s activities with the legislation, articles of association, internal regulations and policies established.
20. Financial Rights Offered to the Board of Directors
No benefit is granted to the chairman and members of the board of directors except for the remuneration determined in the General Assembly. The Company complies with the corporate governance principles that are obliged to be fulfilled by the CMB regarding the fees to be paid. There is no application based on performance or reward for the Board of Directors. As of December 31, 2018, the members of the Board of Directors were provided with the attendance fees approved by the General Assembly (net 5.200TL per person per month).
During the reporting period, no loans were made to any member of the board of directors or managers, no loans were granted directly or through a third party under the name of personal loans, and no guarantees were given in favor of bail.
22
2018 ANNUAL REPORT
Statement of ResponsibilityTHE BOARD OF DIRECTORS RESOLUTION REGARDING TO ACCEPTANCE OF FINANCIAL STATEMENTS AND ANNUAL REPORT
RESOLUTION DATE: 8 March 2019
RESOLUTION NUMBER: 2019/03
STATEMENT OF RESPONSIBILITY PURSUANT TO CAPITAL MARKETS BOARD FINANCIAL REPORTING COMMUNIQUE
(II-14.1), SECTION 2 ARTICLE 9
Approved by the Board of Directors and the Audit Committee, independently audited financial statements of our Company for the accounting period of January – December 2018, prepared pursuant to the CMB’s Financial Reporting Communique (II-14.1) and in compliance with the Turkish Accounting Standards / Turkish Financial Reporting Standards adopted by the Public Oversight Accounting and Auditing Standards Authority, are attached below. We declare that,
a) We have examined the consolidated financial statements dated December 31, 2018,
b) With the available information in accordance with our duties and responsibilities, the consolidated financial statements and the annual report do not contain material misstatements on key issues or any omissions that may be misleading as of the date of the disclosure,
c) The consolidated financial statements prepared in accordance with the current financial reporting standards provide an accurate view on the Company’s assets, liabilities, profit and loss and the annual report reflects the performance of the business and financial position of the Company including the principal risks and uncertainties our company is exposed to.
Sincerely,
DÖKTAŞ DÖKÜMCÜLÜK TİCARET VE SANAYİ A.Ş.
23
24
25
26
27
28
29
30
DÖKTAŞ DÖKÜMCÜLÜK TİCARET VE SANAYİ A.Ş.
Consolidated Financial StatementsAs at and For the YearEnded 31 December 2018With Independent Auditors’ Report Thereon
(Convenience Translation of Financial Statementsand Notes to the Financial StatementsOriginally Issued in Turkish)
11 Mart 2019This report includes 7 pages of IndependentAuditors’ Report and 71 pages of financialstatements and notes to the financial statements.
2018 CONSOLIDATEDFINANCIAL STATEMENTS
31
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 32
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 33
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 33
CONSOLIDATED STATEMENT OF CASH FLOWS 34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 35-
NOTE 1 ORGANIZATION AND NATURE OF OPERATIONS 35
NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS AND ACCOUNTING POLICIES 36-45
NOTE 3 SEGMENT REPORTING 45-46
NOTE 4 CASH AND CASH EQUIVALENTS 46
NOTE 5 SHORT AND LONG TERM BORROWINGS 47-48
NOTE 6 TRADE RECEIVABLES AND PAYABLES 48
NOTE 7 OTHER RECEIVABLES AND PAYABLES 48-49
NOTE 8 PAYABLES RELATED TO EMPLOYEE BENEFITS 49
NOTE 9 INVENTORIES 49
NOTE 10 PREPAID EXPENSES 49
NOTE 11 EQUITY-ACCOUNTED INVESTEES 49
NOTE 12 PROPERTY, PLANT AND EQUİPMENT 50
NOTE 13 INTANGIBLE ASSETS 50
NOTE 14 GOODWILL 51
NOTE 15 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES 51-52
NOTE 16 EMPLOYEE BENEFITS 52
NOTE 17 OTHER ASSETS AND LIABILITIES 53
NOTE 18 SHAREHOLDER’S EQUITY 53-54
NOTE 19 REVENUE AND COST OF SALES 54
NOTE 20 RESEARCH EXPENSES, MARKETING EXPENSES, GENERAL ADMINISTRATIVE EXPENSES 54
NOTE 21 EXPENSES BY TYPE 54
NOTE 22 OTHER OPERATING INCOME AND EXPENSES 54-55
NOTE 23 INCOME FROM INVESTING ACTIVITIES 55
NOTE 24 FİNANCE INCOME 55
NOTE 25 FİNANCE COSTS 55
NOTE 26 TAX ASSETS AND LIABILITIES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) 55-56
NOTE 27 EARNINGS/ (LOSS) PER SHARE 56
NOTE 28 RELATED PARTY DISCLOSURES 57
NOTE 29 CHARACTERISTICS AND LEVEL OF RISKS RESULTING FROM FINANCIAL INSTRUMENTS 58-62
NOTE 30 EXPLANATIONS RELATED TO CASH FLOW STATEMENT 62
NOTE 31 EXPLANATIONS RELATED TO STATEMENT OF CHANGES IN EQUITY 62
NOTE 32 EVENTS AFTER THE REPORTING PERIOD 62
Contents
32
CONSOLIDATED FINANCIAL STATEMENTS
Audited Audited
Notes 31 December 2018 31 December2017ASSETSCurrent Assets 363.638.379 277.381.300Cash and Cash Equivalents 4 27.741.417 17.464.098 4 27.741.417 17.464.098Trade Receivables 6 154.001.711 123.713.249 6 154.001.711 123.713.249
- Trade receivables from third parties 154.001.711 123.713.249 154.001.711 123.713.249Other Receivables 7 1.335.268 1.473.715 7 1.335.268 1.473.715
- Other receivables from third parties 1.335.268 1.473.715 1.335.268 1.473.715Inventories 9 166.184.515 121.150.955 9 166.184.515 121.150.955Prepaid Expenses 10 6.629.639 2.807.138 10 6.629.639 2.807.138Current Income Tax Assets 26 -- 919.103 26 -- 919.103Other Current Assets 17 7.745.829 9.853.042 17 7.745.829 9.853.042
Non-Current Assets 996.097.924 771.122.709Trade Receivables 6 161.720.823 121.110.004
- Trade receivables from third parties 161.720.823 121.110.004Other Receivables 7 14.585.849 10.551.157
- Financial receivables from third parties 14.585.849 14.585.849Equity-Accounted Investees 11 8.190.316 5.637.272Property, Plant and Equipment 12 777.288.682 607.050.269Intangible Assets 11.842.633 8.582.887
- Goodwill 14 6.834.872 5.119.918- Other intangible assets 13 5.007.761 3.462.969
Prepaid Expenses 10 13.140.604 9.234.874Other Non-Current Assets 17 9.329.017 8.956.246
TOTAL ASSETS 1.359.736.303 1.048.504.009
Audited Audited
Notes 31 December 2018 31 December2017LIABILITIESCurrent Liabilities 671.802.117 347.985.528Short-Term Borrowings 5 211.809.821 190.584.119Short-Term Portion of Long-Term Borrowings 5 323.526.057 10.821.364Trade Payables 6 94.266.310 101.317.805
- Trade payables to related parties 28 7.058.487 238.329- Trade payables to third parties 87.207.823 101.079.476
Other Payables 7 9.440.939 6.261.210- Other payables to third parties 9.440.939 6.261.210
Payables Related to Employee Benefits 8 14.769.890 15.075.191Short-term Provisions 15 14.637.449 18.817.393
-Short-term provisions for employee benefits 3.639.188 2.667.314-Other short-term provisions 10.998.261 16.150.079
Other Current Liabilities 17 3.351.651 5.108.446
Non-Current Liabilities 559.050.603 652.878.724Long-Term Borrowings 5 479.994.480 605.944.247Other Payables 7 485.573 363.737
- Other payables to third parties 485.573 363.737Long-Term Provisions 16 51.350.736 35.016.817
- Long-term provisions for employee benefits 51.350.736 35.016.817Deferred Tax Liabilities 26 27.219.814 11.553.923
TOTAL LIABILITIES 1.230.852.720 1.000.864.252EQUITY 128.883.583 47.639.757Paid-in Capital 18 66.844.800 66.844.800Inflation Adjustment Differences on Paid-in Capital 45.195.347 45.195.347Share Premium 18 161.041 161.041Other Comprehensive Income/Expense Items That willnot to be Reclassified to Profit or Loss
(2.672.758) 40.636.228
- Gain on revaluation and re-measurement 48.661.515 63.668.601 48.661.515 63.668.601- Remeasurements of defined benefit liability (51.334.273) (23.032.373) (51.334.273) (23.032.373)
Other Comprehensive Income/Expense Items That are or may be Reclassified Subsequently to Profit or Loss
200.474.272 172.403.448
- Foreign currency translation differences 18 200.474.272 172.403.448Restricted Reserves 18 16.035.194 16.035.194Other Equity Interests 18 (424.245.815) (424.245.815)Prior Years’ Profits 18 125.860.629 62.481.740Net Profit/(Loss) for the Year 101.230.873 68.127.774
TOTAL LIABILITIES AND EQUI 1.359.736.303 1.048.504.009
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2018(Amounts are expressed in Turkish Lira (“TL”) unless otherwise stated.)
33
Audited Audited
PROFIT OR LOSS: Notes1 January-31
December 20181 January-31
December 2017Revenue 19 1.179.872.081 1.066.330.776Cost of Sales (-) 19 (931.795.423) (807.473.506)
GROSS PROFIT 248.076.658 258.857.270
Marketing Expenses (-) 20 (40.788.733) (66.319.217)General Administrative Expenses (-) 20 (63.045.160) (44.990.803)Research and Development Expenses (-) 20 (655.322) (3.378.968)Other Operating Income 22 60.676.701 15.658.194Other Operating Expenses (-) 22 (7.646.599) (22.004.327)
OPERATING PROFIT 196.617.545 137.822.149
Income from Investing Activities 23 5.545.400 2.401.564Share of Profit of Equity-Accounted Investees 11 820.385 781.531
OPERATING PROFIT BEFORE FINANCE COSTS 202.983.330 141.005.244
Finance Income 24 18.029.957 8.070.387Finance Expenses (-) 25 (111.125.698) (71.883.170)
OPERATING PROFIT/(LOSS) BEFORE TAX 109.887.589 77.192.461
Income Tax Expense (8.656.716) (9.064.687)- Current Tax Expense 26 -- 671.484- Deferred Tax Income 26 (8.656.716) (9.736.171)
NET PROFIT/(LOSS) FOR THE YEAR 101.230.873 68.127.774
Ordinary and Diluted Earnings/(Loss) per Share (Nominal value of 1 Kuruş) 27 15,1442 10,1919
OTHER COMPREHENSIVE INCOME
Profit or Loss not to be Reclassified (41.192.031) (4.787.964)- Revaluation of property, plant and equipment 12 (13.390.793) --- Remeasurements of defined benefit liability 16 (35.377.375) (5.984.955)- Tax – Related to other comprehensive income not attributable to profit or losses 26 7.576.137 1.196.991Profit or Loss to be Reclassified 28.070.824 15.683.542 28.070.824 15.683.542
- Foreign currency translation differences 28.070.824 15.683.542
TOTAL COMPREHENSIVE INCOME (13.121.207) 10.895.578
TOTAL COMPREHENSIVE INCOME 88.109.666 79.023.352
Other ComprehensiveIncome/Expense Items That willnot to be Reclassified to Profit or
Loss
OtherComprehensive
Income/ExpenseItems That are
or may beReclassified
Subsequently toProfit or Loss
NotesPaid-inCapital
Inflationadjustmentdifferences
on paid-incapitalı
SharePremium
Gain onrevaluation and
remeasurement
Remeasurementsof defined
benefit liabilityı
ForeignCurrency
TranslationDifferences
RestrictedReserves
OtherEquity
InterestsPrior years’
profits
Netprofit/(loss)for the year
Totalequity
Balances at 1 January 2017 66.844.800 45.195.347 161.041 65.254.386 (18.244.409) 156.719.906 16.035.194 (429.474.292) 93.112.258 (32.216.303) (36.612.072)Transfers -- -- -- -- -- -- -- -- (32.216.303) 32.216.303 --Total comprehensive income -- -- -- -- (4.787.964) 15.683.542 -- -- -- 68.127.774 79.023.352Depreciation transfer -- -- -- (1.585.785) -- -- -- -- 1.585.785 -- --Dividend -- -- -- -- -- -- -- 5.228.477 -- -- 5.228.477
Balances at 31 December 2017 18 66.844.800 45.195.347 161.041 63.668.601 (23.032.373) 172.403.448 16.035.194 (424.245.815) 62.481.740 68.127.774 47.639.757
Balances at 1 January 2018 66.844.800 45.195.347 161.041 63.668.601 (23.032.373) 172.403.448 16.035.194 (424.245.815) 62.481.740 68.127.774 47.639.757TFRS 9 Adjustment (Note 2.5) -- -- -- -- -- -- -- -- (6.865.840) -- (6.865.840)Adjusted balances as of 1 January 2018 66.844.800 45.195.347 161.041 63.668.601 (23.032.373) 172.403.448 16.035.194 (424.245.815) 55.615.900 68.127.774 40.773.917Transfers -- -- -- -- -- -- -- -- 68.127.774 (68.127.774) --Total comprehensive income -- -- -- (12.890.131) (28.301.900) 28.070.824 -- -- -- 101.230.873 88.109.666Depreciation transfer -- -- -- (2.116.955) -- -- -- -- 2.116.955 -- --
Balances at 31 December 2018 18 66.844.800 45.195.347 161.041 48.661.515 (51.334.273) 200.474.272 16.035.194 (424.245.815) 125.860.629 101.230.873 128.883.583
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2018(Amounts are expressed in Turkish Lira (“TL”) unless otherwise stated.)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2018(Amounts are Express in Turkish Lira (“TL”) unless otherwise stated.)
34
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2018(Amounts are expressed in Turkish Lira (“TL”) unless otherwise stated.)
Audited Audited
Notes 31 December 2018 31 December 2017 A. CASH FLOWS FROM OPERATING ACTIVITIES 58.841.779 (55.682.305) 58.841.779 (55.682.307)Net profit/(loss) 101.230.873 68.127.774 101.230.873 68.127.774Adjustments to reconcile net profit to cash provided by operating activities: 181.976.091 103.680.073
181.976.091 103.680.073
Depreciation and amortisation expenses 12,13 42.340.085 36.522.181(Reversal of)/Provision for impairment 7.470.689 3.112.972
(Reversal of)/Provision for diminution in value of inventories 9 (1.111.611) 760.666Provision for impairment on trade receivables 6 8.582.300 2.352.306
Adjustments related to provisions (2.328.115) 14.399.079Provision for employee termination benefits 15,16 7.621.654 7.061.768Provision of litigation 15 (738.337) 1.135.655Other provisions (cancellations) 15 (9.211.432) 6.201.656
Adjustments related to interest (income)/expense 64.863.699 47.552.329Interest income 24 (154.058) --Interest expense 25 65.017.757 47.552.329
Unrealized foreign currency translation differences (33.892.071) (74.282.785)Share of profit of equity-accounted investees 11 11 (820.385) (781.531)Tax income 26 8.656.716 9.064.687Gain on sale of property, plant, and equipment (5.545.400) (34.634)
Gain on sale of property, plant, and equipment 23 (5.545.400) (34.634)
Cash flows from operating activities before changes in operating assets and liabilities: 181.976.091 103.680.072
Increase in trade receivables (83.703.275) (113.171.136)(Increase)/decrease in trade receivables from related parties -- 99.955.005(Increase)/decrease in trade receivables from third parties (83.703.275) (213.126.141)
Increase in other receivables from operating activities (3.896.245) 1.051.580Decrease in other receivables from related party operations -- 12.591.208(Increase)/decrease in other receivables from third party operations (3.896.245) (11.539.628)
Increase in inventories (43.921.949) (2.335.994)(Increase)/decrease in prepaid expenses (7.728.231) 1.183.870Increase in trade payables (7.051.495) (64.377.351)
Increase in trade payables to related parties 6.820.158 (17.280.892)Increase in trade payables to third parties (13.871.653) (47.096.459)
Increase in other payables from operating activities 3.301.565 (3.025.078)Increase in other payables from operating activities with third parties 3.301.565 (3.025.078)(Increase)/decrease on working capital 32.896.560 27.781.141
Increase in other assets from operations 2.653.545 11.618.167Decrease in other liabilities from operations 30.243.015 16.162.974
Increase/(decrease) in payables related to employee benefits (305.301) 989.183Other cash flows/change in restricted cash) 4 -- (4.102.994)
Cash from operating activities 71.567.720 (52.326.707)
Payments of employee termination benefits 16 (16.947.635) (5.313.858)Tax paid 26 -- (919.103)Other cash inflows 6 4.221.694 2.877.361
Net cash from operating activities 58.841.779 (55.682.307)
B. CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sale of property, plant and equipment 15.032.299 2.540.999Acquisition of property, plant and equipment and intangible assets (32.582.953) (25.020.066)
Acquisition of property, plant and equipment 12 (28.823.241) (22.097.831)Acquisition of intangible assets 13 (3.759.712) (2.922.235)
Dividend received 11 (155.585) (90.360)Interest received 154.058 --
Net cash used in investing activities (17.552.181) (22.569.427)
C. CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings 206.302.875 285.032.186
Proceeds from bank loans 206.302.875 285.032.186Repayment of borrowings (237.560.957) (191.733.676)
Repayment of bank loans (236.322.313) (165.751.808)Repayment factoring payables (42.425) (2.873.317)Other financial borrowing payments (1.196.219) (23.108.551)
Net cash provided from financing activities (31.258.082) 93.298.510
INCREASE IN CASH AND CASH EQUIVALENTS BEFORE FOREIGN 10.031.516 15.046.776EXCHANGE (A+B+C) 245.803 --D. FOREIGN EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS 4 17.464.098 2.417.322E. CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 10.277.319 15.046.776NET INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D)NET CASH AND CASH EQUIVALENTS AT THE END OF PERIOD (A+B+C+D +E) 4 27.741.417 17.464.098
35
1. ORGANIZATION AND NATURE OF OPERATIONS
Döktaş Dökümcülük Ticaret ve Sanayi A.Ş. (the “Company”) was established in 1973 in Orhangazi, Bursa and operated as a subsidiary of Koç Holding A.Ş until 12 December 2006. On 12 December 2006, Koç Holding transferred its shares to Componenta Oyj located in Finland. Since then the Company became a subsidiary of Componenta Oyj.
On 1 September 2016, Componenta Oyj declared publicly on Helsinki Stock Exchange that Componenta Oyj and its subsidiaries in Finland and Sweden filed for restructuring. It was also decided for Componenta Oyj’s Dutch subsidiary Componenta B.V. file for bankruptcy.
The official file for restructuring of Componenta Oyj has given Turkish banks the right to vote at the Company’s general meetings and to initiate the sale process of shares according to the Share Pledge Agreement signed on 16 June 2016 with the Turkish Banks and the share pledge process that started
on 19 August 2016 for the Central Registry Agency.
The nominal value of TL 62.543.859 corresponding to 93.57% of the Company’s capital was transferred to Döktaş Metal Sanayi ve Ticaret A.Ş. (“Döktaş Metal”) by Componenta Oyj upon approval of the transfer of the pledged shares by the Lenders on 23 September 2017. The transfer transaction was registered on 12 October 2017 and published in Trade Registry Gazette No. 9432. The power to control the operations of the Group has been transferred to Döktaş Metal Sanayi ve Ticaret A.Ş with the transfer transaction.
The trade name of the Company, which was Componenta Dökümcülük Ticaret ve Sanayi Anonim Şirketi, has been changed as Döktaş Dökümcülük Ticaret ve Sanayi A.Ş. on 19 April 2018.
Founded for special purpose, Döktaş Metal decided to sell 93,57% of its shares to Çelik Holding A.Ş on 11 May 2018 and at the same date a share purchase agreement was signed between the parties.
The transfer transactions were completed after the lenders allowed the transfer of the pledged shares to the buyer and the permission was obtained from the Competition Board and the share transfer was completed on 29 June 2018.
The nominal value of TL 62.543.859 corresponding to 93,57% of the Group’s capital were transferred to Çelik Holding A.Ş. by Döktaş Metal upon approval of the transfer of the pledged shares by the Lenders on 29 June 2018. The transfer was registered on 11 July 2018. With the transfer of shares, the
authority to control the Company’s operations was transferred to Çelik Holding A.Ş.
The main operations of the Company are production and trade of gray cast iron, spheroidal cast iron and aluminum castings for the automotive industry. The Company’s production and trading operations are conducted in its premises based in Bursa - Orhangazi and in its aluminum casting factory in Manisa Industrial Area, which was acquired in 1999. The Company is registered with the Capital Markets Board (“CMB”) of Turkey and its shares are currently quoted in Borsa İstanbul A.Ş.
(“BIST”).
The average number of employees for the period 1 January-31 December 2018 was 2.309 (1 January - 31 December 2017: 2.419).
The registered office addresses of Orhangazi and Manisa plants are as follows:
Gölyolu No: 26 P.K. (18) Orhangazi 16801 Bursa.
Organize Sanayi Bölgesi Sakarya Cad. No: 14, 45030 Manisa.
Organize Sanayi Bölgesi İsmail Tiryaki Cad. No:7 45030 Manisa.
Doktas UK Ltd. is the wholly owned subsidiary of the Company. Doktas UK Ltd. operates in England and conducts the trade and marketing activities of gray cast iron, wheel and high pressure manufactured by the Company. As of 18 April 2018, the trade name of Componenta UK Ltd. has beenchanged as Doktas Trading UK Ltd.
The Company and its subsidiary (together referred to as “the Group”) considers gray cast iron, wheel and high pressure as three separate business segments and prepares segment reporting for managementreporting purposes (Note 3). There is no geographical segmentation as the production activities, being the principal area of activity for the Group, are conducted in Turkey.
The associate of the Group is Kumsan Döküm Malzemeleri San. ve Ticaret A.Ş. (“Kumsan”) as at 31 December 2018 (Note 11).
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS AND ACCOUNTING POLICIES
2.1. Basis of Presentation
2.1.1. Approval of Financial Statements
The accompanying consolidated financial statements as at 31 December 2018 have been approved by the Company’s Board of Directors to be published on 11 March 2019. The General Assembly and related legal institutions have the right to amend these consolidated financial statements.
2.1.2. Preparation of the Consolidated Financial Statements and Statement of Compliance to Turkish Financial Reporting Standards (“TFRS”)
The Company and its associate registered in Turkey maintain their accounting records and prepare their statutory financial statements in accordance with the Turkish Commercial Code (the “TCC”), tax legislation and the uniform chart of accounts issued by the Ministry of Finance. Subsidiary operating in foreign country prepares its statutory financial statements in accordance with the laws and regulations of the country in which it operates.
The accompanying consolidated financial statements are prepared in accordance with the Communiqué No. II-14.1, “Principles of Financial Reporting in Capital Markets” published in the Official Gazette numbered 28676 and dated 13 June 2013. According to the Communiqué Article 5, financial statements are prepared in accordance with Turkish Financial Reporting Standards (“TFRS”) which are published by Public Oversight Accounting and Auditing Standards Authority (“POA”). TFRS consists of Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards and related appendices and interpretations.
The accompanying consolidated financial statements have been prepared in accordance with the “Announcement on Financial Statements and Footnote Formats” announced by CMB and TAS Taxonomy issued by POA.
The accounting principles described in Note 2.3 (defined as Turkish Accounting Standards/Turkish Financial Reporting Standards) to the accompanying financial statements differ from Turkish Financial Reporting Standards (“TFRS”) issued by the Public Oversight Authority (“POA”) with respect to the application of inflation accounting, classification of some profit or loss items and also for certain disclosures requirement of the POA.
2.1.3. Basis of Measurement
The consolidated financial statements have been prepared on the historical cost basis, except for the land and land improvements and buildings which are measured at fair value.
Basis for Measurement of fair value is explained in Note 29.
2.1.4. Correction of Financial Statements during the Hyperinflationary Periods
In accordance with the CMB’s resolution No: 11/367 issued on 17 March 2005, companies operatin in Turkey which prepare their financial statements in accordance with the regulations of CMB (including those applying TAS/TFRS) are not subject to the application of inflation accounting effective from 1 January 2005. Therefore, as at 1 January 2005, TAS 29 “Financial Reporting in Hyperinflationary Economies” is not applied in the accompanying financial statements.
36
CONSOLIDATED FINANCIAL STATEMENTS
2.1.5. Functional and Presentation Currency
The functional currency of the Company is Euro. Euro is determined as functional currency since it is the most affecting currency that is used in sale of goods manufactured, trade and finance activities. The consolidated financial statements have been prepared in Euro which is functional currency of the Company and have been presented in TL.
Transactions and Balances
Transactions in foreign currencies are translated to the respective functional currency at exchange rates at the dates of the transactions. Foreign currency gains and losses arising from the realization of these transactions and translation of monetary assets and liabilities denominated in foreign currencies to the functional currency at the exchange rate at the reporting date are recognized in that consolidated statement of profit or loss.
The translation of the financial statements of subsidiary in foreign country
Functional currency of the subsidiary operating in foreign country is Great Britain Pound (“GBP”) and the assets, liabilities and equity are translated into the Group’s functional currency, Euro at the exchange rate at the reporting date, statement of profit or loss items are translated at the average rates of exchange used (if exchange rates fluctuate significantly, the use of average rate for a period is inappropriate). Exchange rate differences arising from average exchange rates and reporting date exchange rates are recognised in “foreign currency translation differences” in the consolidated shareholders’ equity for subsidiary operating in foreign country.
For the purpose of translating the financial statements of the subsidiary in the foreign country, the average exchange rates for the periods in the statement of financial position and for the profit or loss table are as follows:
End of the period: 31 December 2018 31 December 2017Turkish Lira / British Pound 6,6528 5,1142
Ortalama:1 January -
31 December 20181 January -
31 December 2017Turkish Lira / British Pound 6,4034 4,6867
Translation to the presentation currency (TL)
(a) As at 31 December 2018, items in the assets and liabilities in the consolidated statement of financial position are translated into TL using the Central Bank of the Republic of Turkey (“CBRT”) buying exchange rate of 6,0280 TL / Euro (31 December 2017: 4,5155). Equity and fixed assets are recorded at historical values.
(b) The items in the consolidated statement of profit or loss and other comprehensive income for the year ended at 31 December 2018 have been translated into TL by using yearly average of CBRT’s Euro bid rate, which corresponds to 5,6789 (For the year ended 31 December 2017, yearly average CBRT Euro exchange buying rate of 4,1164 TL / Euro).
(c) All exchange differences arising have been recognized on foreign currency translation differences within shareholders’ equity on the Group’s consolidated financial statements.
2.2. Going Concern
As at 31 December 2018, the consolidated financial statements have been prepared in accordance with “Going Concern” principle. In assessment of going concern, the Group management has taken into account the uncertainties on current and available financing resources, refinancing possibilities and liquidity risks in the business plan prepared for a predictable period of time.
On 1 September 2016, Componenta Oyj, declared publicly on Helsinki Stock Exchange that Componenta Oyj and its subsidiaries in Finland and Sweden filed for restructuring. It was also deciced for Componenta Oyj’s Dutch subsidiary Componenta B.V. file for bankruptcy. The restructuring process of
the parent company and the group companies has been continuing as at the reporting date. The Group has applied to the bankruptcy desk for the Dutch facilities and has initiated legal action for the collection of the receivables. On 23 August 2017, Componenta Oyj announced on the Nasdaq Stock Exchange that the application of Componenta Finland Ltd. and Componenta Frammestad AB which are the subsidiaries of the Componenta Oyj for the debt structuring have been approved and the process of debt structuring is completed. The order of bankruptcy for the Componenta Wirsbo AB and
The restructuring processes initiated have been concluded as a result of mutual signatures with the assigned trustees. In the context of restructuring, administrators appointed to Componenta Oyj and to the group companies have presented their restructuring proposals for respective companies’ debts to the Group. The Group has recognised the uncollectible portion for commercial, financial and other receivables from related parties amounting to TL 429.474.292 as other equity interests in equity. The negotiations with the trustees of related countries have been concluded in 2017. The irrecoverable receivables have been revised in the context of contracts and the difference amounting to 5.228.477 TL which is in favor of the Group has been reclassified to equity and other equity shares have been revised as TL 424.245.815.
The nominal value of TL 62.543.859 corresponding to 93.57% of the Group’s capital was transferred to Döktaş Metal Sanayi ve Ticaret A.Ş. by Componenta Oyj upon approval of the transfer of the pledged shares by the Lenders on 23 September 2017. The transfer transaction was registered on 12 October 2017 and published in Trade Registry Gazette No. 9432. The power to control the operations of the Group has been transferred to Döktaş Metal Sanayi ve Ticaret A.Ş with the transfer transaction.
On the other hand, Döktaş Metal has signed a share transfer consultancy agreement with İş Yatırım Menkul Değerler on 27 September 2017 and the Company’s shares are sold to a buyer with a strategic and strong capital structure. On 11 May 2018, Döktaş Metal decided to sell 93.57% of its shares to Çelik Holding AS and a share transfer agreement was signed between the parties on the same date.
The nominal value of TL 62.543.859 corresponding to 93,57% of the Group’s capital were transferred to Çelik Holding A.Ş. by Döktaş Metal upon approval of the transfer of the pledged shares by the Lenders on 29 June 2018. The transfer was registered on 11 July 2018. Together with the transfer of shares, the Group’s authority to control its operations was transferred to Çelik Holding A.Ş.
As of 31 December 2018, the Group has a total financial liability amounting to TL 1,015,330,358; TL 535,338,878 of which is short-term and TL 479.994.480 of which is long-term. On 27 September 2017, the Company completed the process of restructuring its existing loans with the lending banks and the use of new loans. The loan package renewed with the same banks under the auspices of Döktaş Metal was revised with the new loan package signed on 29 June 2018 and it was transferred to Çelik Holding A.Ş.
Within the scope of the share transfer agreement signed between Döktaş Metal and Çelik Holding A.Ş., Çelik Holding A.Ş. acknowledges that working capital needs to be provided to the Company in order to ensure the continuity of its activities and accepts and declares that it will pay this capital. The Company’s sustainability and financial statements will be ensured under the guarantee of Çelik Holding.
2.3. Consolidation Principles
The consolidated financial statements include the accounts of the parent company, Döktaş Dökümcülük Ticaret ve Sanayi A.Ş., and its subsidiary on the basis set out in sections below. The financial statements of the companies included in the scope of consolidation have been prepared as at the date of the consolidated financial statements and have been prepared in accordance with TFRS stated in Note 2.1.2 by applying uniform accounting policies and presentation. The results of operations of the subsidiary are included from effective date of acquisition.
37
Subsidiaries
The table below sets out the subsidiary and demonstrates the proportion of ownership interest as at 31 December 2018 and 31 December 2017:
31 December 2018 Shares
31 December 2017 Shares
Doktas UK Ltd. %100 %100
The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The statement of financial position and statements of profit or loss and other comprehensive income of the subsidiary are consolidated on line-by-line basis and the carrying value of the investment held by the Company and its subsidiary is eliminated against the related equity. Intercompany transactions and balances between the Company and its subsidiary are eliminated during the consolidation. Unrealized losses are eliminated unless the transactions indicates an impairment in the transferred asset. The cost of, and the dividends arising from, shares held by the Company in its subsidiary are eliminated from shareholders’ equity and income for the period, respectively.
The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Since the Group owns all shares of the subsidiary, there is no non-controlling interest
Investment in Associate
The Group’s interests in equity-accounted investees comprise interests in associates.
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.
Interests in associates are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equityaccounted investees, until the date on which significant influence or joint control ceases.
The following table shows the ratio of the Group’s shares in the associate:
31 December 2018 Shares
31 December 2017 Sharesı
Kumsan %25,10 %25,10
2.4. Changes in TFRS
Implementation of new and revised Turkish Financial Reporting Standards and interpretations
In the current period, there are no standards or comments that affect the financial performance, financial position, presentation or footnote statements of the group other than TFRS 15 and TFRS 9.
However, the following details are given regarding the current period and the standards that have no effect on the company’s financial statements and the standards and interpretations that have not yet been enacted and which have not been implemented early by the Company.
Standards issued but not yet effective and not early adopted
New standards, interpretations and amendments to existing standards are not effective at reporting date and earlier application is permitted; however the Group has not early adopted are as follows.
TFRS 16 Leases
On 13 January 2016, POA issued the new leasing standard which will replace IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC 15 Operating Leases – Incentives, and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease and consequently changes to IAS 40 Investment Properties. TFRS 16 Leases eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and offbalance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. Lessor accounting remains similar to current practice. TFRS 16 is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted provided that an entity also adopts TFRS 15 Revenue from Contracts with Customers. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of TFRS 16.
TFRS Interpretation 23 Uncertainty Over Income Tax Treatments
On 17 June 2017, POA issued TFRIC 23 Uncertainty over Income Tax Treatments to specify how to reflect uncertainty in accounting for income taxes. It may be unclear how tax law applies to a particular transaction or circumstance, or whether a taxation authority will accept a company’s tax treatment. IAS 12 Income Taxes specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. TFRIC 23 provides requirements that add to the requirements in IAS 12 by specifying how to reflect the effects of uncertainty in accounting for income taxes. TFRIC 23 is effective from 1 January 2019, with earlier application is permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of TFRIC 23.
Amendments to TFRS 9 - Prepayment features with negative compensation
On December 2017, POA has issued amendments to TFRS 9 to clarify that financial assets containing prepayment features with negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of TFRS 9. Under TFRS 9, a prepayment option in a financial asset meets this criterion if the prepayment amount substantially represents unpaid amounts of principal and interest, which may include ‘reasonable additional compensation’ for early termination of the contract. The amendments are effective for periods beginning on or after 1 January 2019, with earlier application permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of the amendments to TFRS 9.
Amendments to IAS 28- Long-term Interests in Associates and Joint Ventures
On December 2017, POA has issued amendments to TAS 28 to clarify that entities also apply TFRS 9 to other financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. An entity applies TFRS 9 to such long-term interests before it applies related paragraphs of TAS 28. In applying TFRS 9, the entity does not take account of any adjustments to the carrying amount of long-term interests that arise from applying TAS 28. The amendments are effective for periods beginning on or after 1 January 2019, with earlier application permitted.
The Revised Conceptual Framework
The revised Conceptual Framework issued on 28 March 2018 by the POA. The Conceptual Framework sets out the fundamental concepts for financial reporting that guide the Board in developing TFRS Standards. It helps to ensure that the Standards are conceptually consistent and that similar transactions are treated the same way, so as to provide useful information for investors, lenders and other creditors. The Conceptual Framework also assists companies in developing accounting policies when no TFRS Standard applies to a particular transaction, and more broadly, helps stakeholders to understand and interpret the Standards. The revised Framework is more
38
CONSOLIDATED FINANCIAL STATEMENTS
comprehensive than the old one – its aim is to provide the Board with the full set of tools for standard setting. It covers all aspects of standard setting from the objective of financial reporting, to presentation and disclosures. For companies that use the Conceptual Framework to develop accounting policies when no TFRS Standard applies to a particular transaction, the revised Conceptual Framework is effective for annual reporting periods beginning on or after 1 January 2020, with earlier application permitted.
Annual Improvements to IFRSs 2015-2017 Cycle
Improvements to IFRSs
POA issued Annual Improvements to IFRSs - 2015–2017 Cycle for applicable standards. The amendments are effective as of 1 January 2019. Earlier application is permitted. The Group does not expect that application of these improvements to IFRSs will have significant impact on its consolidated financial statements.
IFRS 3 Business Combinations and IFRS 11 Joint Arrangements
IFRS 3 and IFRS 11 are amended to clarify how a company accounts for increasing its interest in a joint operation that meets the definition of a business. If a party obtains control, then the transaction is a business combination achieved in stages and the acquiring party remeasures the previously held interest at fair value. If a party maintains (or obtains) joint control, then the previously held interest is not remeasured.
IAS 12 Income Taxes
IAS 12 is amended to clarify that all income tax consequences of dividends (including payments on financial instruments classified as equity) are recognised consistently with the transactions that generated the distributable profits – i.e. in profit or loss, other comprehensive income (OCI) or equity.
IAS 23 Borrowing Costs
IAS 23 is amended to clarify that the general borrowings pool used to calculate eligible borrowing costs excludes only borrowings that specifically finance qualifying assets that are still under development or construction. Borrowings that were intended to specifically finance qualifying assets that are now ready for their intended use or sale – or any non-qualifying assets – are included in that general pool.
Amendments to IAS 19 - Plan Amendment, Curtailment or Settlement
On 7 February 2018, POA issued Plan Amendment, Curtailment or Settlement (Amendments to IAS 19). The amendments clarify the accounting when a plan amendment, curtailment or settlement occurs. A company now uses updated actuarial assumptions to determine its current service cost and net interest for the period; and the effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income (OCI). The amendments are effective for periods beginning on or after 1 January 2019, with earlier application permitted. The Group does not expect that application of these amendments to IAS 19 will have significant impact on its consolidated financial statements.
TFRS 17 Insurance Contracts
On 18 May 2017, POA issued IFRS 17 Insurance Contracts. This first truly globally accepted standard for insurance contracts will help investors and others better understand insurers’ risk exposure, profitability and financial position. IFRS 17 replaces IFRS 4, which was brought in as an interim Standard in 2004. IFRS 4 has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches. As a consequence, it is difficult for investors to compare and contrast the financial performance of otherwise similar companies. IFRS 17 solves the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner, benefiting both investors and insurance companies. Insurance obligations will be accounted for using current values – instead of historical cost. The
information will be updated regularly, providing more useful information to usersof financial statements. IFRS 17 has an effective date of 1 January 2021 but companies can apply it earlier.
Amendments to IAS 1 and IAS 8 - Definition of Material
In October 2018 the POA issued Definition of Material (Amendments to IAS 1 and IAS 8). The amendments clarify and align the definition of ‘material’ and provide guidance to help improve consistency in the application of that concept whenever it is used in IFRS Standards. Those amendments are prospectively effective for annual periods beginning on or after 1 January 2020 with earlier application permitted.
Amendments to TFRS 3 - Definition of a Business
Determining whether a transaction results in an asset or a business acquisition has long been a challenging but important area of judgement. The POA has issued amendments to TFRS 3 Business Combinations that seek to clarify this matter. The amendments include an election to use a concentration test. This is a simplified assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If a preparer chooses not to apply the concentration test, or the test is failed, then the assessment focuses on the existence of a substantive process. The amendment applies to businesses acquired in annual reporting periods beginning on or after 1 January 2020. Earlier application is permitted. The Group does not expect that application of these amendments to TFRS 3 will have significant impact on its consolidated financial statements.
2.5. Changes in the accounting policies
Significant changes in accounting policies and significant accounting errors are applied retrospectively and prior period financial statements are restated.
There are no changed accounting policies in the consolidated financial statements and all accounting policies are applied in accordance with the previous periods except for the first time adoption of TFRS 15 and TFRS 9.
The details of significant new accounting policies and the impact and nature of changes in prior accounting policies are set out below.
(a) TFRS 15 Revenue from contracts with customers
TFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaced TAS 18 Revenue, TAS 11 Construction Contracts and related interpretation.
TFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. Applying TFRS 15, an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The new standard is effective for periods beginning on or after 1 January 2018 and the application of TFRS 15 has not had significant impact on the consolidated financial statements and performance of the Group.
(b) TFRS 9 Financial Instruments
TFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities. This standard replaces TAS 39 Financial Instruments: Recognition and Measurement.
The details of TFRS 9 are set out below:
i. Classification and measurement of financial assets and financial liabilities
TFRS 9 largely retains the existing requirements in TAS 39 for the classification and measurement of financial liabilities. However, it eliminates the previous TAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale.
39
The adoption of TFRS 9 has not had a significant effect on the Group’s accounting policies related to financial liabilities and derivative financial instruments.
Detailed information on how the Group classifies and measures the financial assets in accordance with TFRS 9 is presented below.
Under TFRS 9, on initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other comprehensive income (“FVOCI”) – debt investment; FVOCI – equity investment; or fair value through profit or loss (“FVTPL”). The classification of financial assets under TFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
ii. Impairment of financial assets
TFRS 9 replaces the “incurred loss” model in TAS 39 with an “expected credit loss” model. The new impairment model applies to financial assets measured at amortized cost and contract assets but not to investments in equity instruments.
Effect of TFRS 9 on financial statements
The Group has started to apply TFRS 9 Financial Instruments standard at the first application date of 1 January 2018. TFRS 9 establishes requirements for the accounting and measurement of financial assets and liabilities, and for the purchase or sale of certain non-financial items. As of 1 January 2018, the effect of TFRS 9 on prior years’ profit, net of tax, is summarized as follows:
TFRS 9 applicationEffect on Opening Balances
Prior period profitsAccounting for expected credit losses in accordance with TFRS 9 (8.582.300)Tax effect 1.716.460
Impact as at 1 January 2018 (6.865.840)
The effect of the application of TFRS 9 on the carrying amounts of financial assets as at 1 January 2018 stems from the new provision for impairment as explained in more detail below.
The following table and accompanying notes clarify the original measurement categories within the scope of TAS 39 and the new measurement categories for each class of the Company’s financial assets at 1 January 2018 in accordance with TFRS 9.
Notes
Originalclassification
according to TAS39
New classificationaccording to TFRS 9
Originalbook value
according toTAS 39
New bookvalue
according toTFRS 9
Financial assets
Cash and cash equivalents 4 Loan and receivables Amortized cost 17.464.098 17.464.098Trade receivables 6 Loan and receivables Amortized cost 244.823.253 236.240.953Other receivables 7 Loan and receivables Amortized cost 1.473.715 1.473.715
Total financial assets 263.761.066 255.178.766
Trade and other receivables classified as loans and receivables according to TAS 39 are now classified as those measured at amortized cost. An impairment loss of TL 8.582.300 for these receivables is recognized in prior years’ profits in the transition to TFRS 9 on 1 January 2018.
As at 1 January 2018, the Company has determined that the application of the provisions of TFRS 9 relating to impairment results in an additional provision for impairment.
Provision for loss in accordance with TAS 39 as at 31 December 2017 3.955.163
Additional impairment recognized on 1 January 2018:- Trade Receivables
8.582.300
Provision for loss in accordance with TFRS 9 as at 1 January 2018 12.537.463
2.6. Changes in Accounting Estimates and Errors
Effect of changes in accounting estimates, if they are only related to one period, is recognized in the period that the change is made, if they are related with the future periods, is recognized in the current period and also in future periods, prospectively. There is no significant change in the accounting estimates of the Group in the current year.
Significant accounting errors are corrected retrospectively and prior period consolidated financial statements are restated. The Group has no significant accounting error in the current year.
40
CONSOLIDATED FINANCIAL STATEMENTS
2.7. Summary of Significant Accounting Policies
Significant accounting policies used in the preparation of consolidated financial statements are summarized below:
Financial Instruments
Classification and subsequent measurement
On initial recognition, a financial asset is classified as measured at: amortised cost; Fair Value Through Other Comprehensive Income (“FVOCI”) – debt investment; FVOCI – equity investment; or Fair Value Through the Statement of Profit or Loss (“FVTPL”).
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- it is its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt instrument, the provision of the following two conditions and reflected in profit or loss FVTPL differences reflected in other comprehensive income, classified as measured using in case of failure to measure.
- contractual cash flows of the financial asset to be collected and financial assets keeping it within the scope of a business model aimed at selling; and
- contract conditions for financial assets lead to cash flows involving interest payments arising solely from the principal and principal balances at specific dates.
Investments in non-commercial equity instruments that are not available for sale for the first time in the financial statements may be made an irrevocable choice to present subsequent changes in other comprehensive income at fair value. The choice of this choice can be made on an investment basis.
All financial assets that are not measured at amortized cost as stated above or at the other comprehensive income are measured at the FVTPL difference. These include all derivative financial assets. In the first time, when financial assets are initially included in the financial statements, it can be defined as an irrevocable change in fair value through profit or loss, provided that it eliminates or substantially reduces any accounting mismatch arising from the measurement of financial assets and the inclusion of related earnings or losses in the financial statements.
Fair value changes in the initial measurement of financial assets other than those reflected in profit or loss (except trade receivables which are measured at the transaction cost and which do not have a significant component of financing) transaction costs that are directly attributable to acquisition or export are measured at fair value.
The following accounting policies apply to the subsequent measurement of financial assets.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments which their maturities are three months or less from date of acquisition and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. The Group’s cash and cash equivalents are classified under the category of ‘Loans and Receivables’.
Financial liabilities
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.
Financial liabilities are classified as either financial liabilities at fair value through profit and loss or other financial liabilities.
Financial assets at FVTPLThese assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
Financial assets at amortized cost
These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses andimpairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at FVOCI
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCIThese assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.
41
a) Financial liabilities at fair value through profit and loss
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability.
b) Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Derivative financial instruments and hedging
Derivative financial instruments are initially recognized at fair value and are subsequently remeasured at their fair value. Derivative financial instruments of the Group predominantly constitute forward foreign currency purchase and sale contracts.
The fair value of forward foreign exchange contracts measured at fair value and associated with the consolidated profit or loss is calculated by reference to the market interest rates valid for the rest of the contract for the relevant currency for the relevant period, by comparison with exchange rate. Derivatives are recorded as assets or liabilities in the balance sheet, respectively, depending on whether the fair value is positive or negative differences arising from the fair value of derivative financial instruments except for the cash flow hedge explained below are reflected in the profit and loss statement in the consolidated statements of income.
Cash flow hedge
The Group performs cross currency transactions with participation option to hedge the cash flow risk of variable and fixed rate financial instruments and liabilities in different currencies. The effective portion of the fair value change of the hedging instrument in the cash flow hedge accounting is recognized in “other comprehensive income”, while the ineffective portion is recognized in the in profit or loss. In the periods in which the cash flows of the hedged item affect the profit or loss, the profit or loss of the hedging instrument is also removed from equity and reflected to the income statement. In addition, the time value change in the options included in the structured cross-currency swaps is recognized in other comprehensive income as the hedging cost.
According to TFRS 9, the hedging relationship ends when the required criteria are no longer met after rebalancing. The termination of the hedging relationship is not accepted if the required criteria are met. In the event that the hedging target changes, the hedging instrument expires or is sold, terminated or used, the hedging accounting ends when the economic relationship between the hedging instrument and the hedged item is eliminated or the credit risk affects the fair value changes arising from the economic relationship.
When the Group discontinued hedge accounting for cash flow variability, the amount accumulated in the cash flow hedge fund is recognized as follows;
- The profit or loss recognized in other comprehensive income and presented in the hedging reserve
under equity remains there until the cash flows of the hedged item realised.
- When the cash flows from the hedged item is expected not to be realised, the gain or loss
accumulated under equity is recognized immediately in profit or loss.
Accounting at the date of transaction
All financial assets are recognized and derecognized on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned.
Offsetting
Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
Derecognition
Financial assets
The Group derecognized a financial asset when the contractual rights to the cash flows from the asset expired, or it transferred the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset were transferred. Any interest in such transferred financial assets that was created or retained by the Group was recognized as a separate asset or liability.
The Group continues to recognize the financial asset in the statement of financial position if it retains substantially all the risks and benefits arising from the ownership of a financial asset.
Financial liabilities
The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expired. The Group also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.
Impairment of financial assets
Financial assets and contract assets
The Group recognizes loss allowances for the expected credit losses of the following items:
- financial assets measured at amortized cost;
- contract assets (as defined in TFRS 15).
Under TFRS 9, loss allowances are measured on either of the following bases:
Financial assets measured at amortized cost;
- Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument;and
Bank balances for which credit risk has not increased significantly since initial recognition;
- 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date.
The Group has elected to measure loss allowances for trade receivables and contract assets at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.
The Group considers a debt security to have low credit risk when its credit risk
42
CONSOLIDATED FINANCIAL STATEMENTS
rating is equivalent to the globally understood definition of “investment grade”.
The maximum time to be measured by the ECLs is the maximum contractual period that the Group is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).
For trade receivables, other receivables, other assets and contract assets the Group applies the simplified approach to providing for expected credit losses (TFRS 9 requires the use of the lifetime expected loss provision for all trade receivables). The expected credit losses were calculated based on actual credit loss experience over the past years.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Presentation of impairment
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.
For debt securities at FVOCI, the loss allowance is recognized in OCI, instead of reducing the carrying amount of the asset.
Trade receivables
The following analysis provides further detail about the calculation of ECLs related to trade receivables and contract assets on the adoption of TFRS 9. The Company considers the model and some of the assumptions used in calculating these ECLs as key sources of estimation uncertainty.
The Group has calculated the ECLs according to the experience of credit losses in the last three years. The Group performed the calculation of ECL separately for each customers of receivables at the reporting date. Exposures within each group were segmented based on common credit risk characteristics such as credit risk grade, delinquency status, geographic region, age of relationship.
Invento ries
Inventories are recognized at the lower of cost and net realizable value. Costs comprise purchase cost and, where applicable and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realizable value is the less marketing, selling and other various expenses to be incurred in order to realize sale.
Property, plant and equipment
Land, land improvements and buildings are measured at their fair values and other property, plant and equipment acquired before 1 January 2005 are carried at cost and restated to the equivalent purchasing power at 31 December 2004 less accumulated depreciation. Items acquired after 1 January 2005 are carried at cost less accumulated depreciation and impairment; if any. Depreciation is provided using the straight-line method based on the estimated useful lives of the assets. Depreciation is charged so as to write off the cost or valuation of assets, using the straight-line method. Oncoming changes are reflected to financial statements taking into consideration the capacity utilization rates and economic and technologic developments.
Gains or losses on disposals of property, plant and equipment are determined by comparing proceeds against carrying amounts and are included in income or expense from investing activities.
The Group has adopted “revaluation model” as permitted by TAS 16 “Property, plant and equipment” for its land, land improvements and buildings
commencing from 31 December 2012. The remaining assets such as machinery and equipments, furniture and fixtures, special costs and motor vehicles are continued to be measured at cost less accumulated depreciation and impairment; if any as consistent with prior years. Fair values of lands, land improvements and buildings have been measured by an independent valuation firm as at 31 December 2018.
In the revaluation performed;
* All characteristics like; land location, local formation style, substructure and access opportunities, front line to street and avenue, area and location that may affect the value, have been taken into account, detailed market research has been done locally and the economic conditions that have arisen previously have been considered as well.
* Valuation reports have been prepared according to related Capital Markets Board regulatory provisions.
* Valuation reports have been prepared by an independent expertise firm which gives service according to Capital Markets Board regulatory provisions.
* Cost approach and market value methods and assumptions have been taken into consideration.
* There is no restriction in distribution of increase in revaluation fund to shareholders.
Increases in the carrying amount arising on the revaluation of land, land improvements and buildings are recognised as credit in the gain on revaluation and re-measurement account in equity, net of applicable deferred income tax.
Revalued amount is calculated by deducting the total of accumulated depreciation and impairment that have occurred in the periods after net realizable value determined in revaluation date. Revaluations are performed in every 3-year period, in case that there are not any significant differences between fair value as at reporting date and net book value.
Decrease in book value arisen from the aforementioned revaluation process is recorded in profit or loss in case the revaluation exceeds the balance already included in gain on revaluation and re-measurement account related to previous revaluation of the aforementioned asset.
When a revaluated property, plant and equipment is disposed, gain on revaluation and re-measurement account related with property, plant and equipment is transferred to retained earnings.
At reporting date, for revaluated property, plant and equipment or items of property, plant and equipment denominated at their purchasing value, depreciation is charged so as to write off the cost or valuation of assets, using the straight-line method. Land is not depreciated as it is deemed to have an infinite life. The depreciation periods for property, plant and equipment, which approximate the useful lives of such assets, are as follows.
Useful lives
(year)Buildings 30-50Land improvements 15-30Machinery and equipment 1-15Furniture and fixtures 3-15Motor vehicles 4-5
Intangible assets
Intangible assets comprise acquired rights. They are recorded at acquisition cost and less accumulated amortization and impairment; if any and amortized on the straight-line basis over their estimated useful lives for a period not exceeding 5-15 years from the date of acquisition.
Goodwill
Goodwill has been recognised as an asset and has initially been measured as the excess of the cost of the combination over the fair value of the acquiree’s
43
assets, liabilities and contingent liabilities. The acquirer recognises identifiable assets (such as deferred income tax on carry forward losses), intangible assets (such as trademarks) and/or contingent liabilities which are not included in the acquiree’s financial statements at their fair values in the consolidated financial statements. If the acquisition cost is lower than the fair value of the identifiable assets, liabilities and contingent liabilities acquired, the difference is accounted for as income in the related period.
Impairment of assets
At each reporting date, the Group reviews the carrying amounts of each asset except deferred tax asset to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cashgenerating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss and other comprehensive income, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. Reversal of impairment loss of goodwill is not possible. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Goodwill impairment
Goodwill arising in the purchase transaction is measured at cost at the date of purchase less provision for impairment.
The cash generating unit to which goodwill is allocated is subject to impairment testing every year. If there are indications that the unit is impaired, the impairment test is performed more frequently. If the recoverable amount of a cash-generating unit is less than the carrying amount, the impairment loss is initially recognized as the goodwill assigned to the unit, then the carrying amount of the assets in the unit is reduced. Impairment provision for goodwill is recognized directly in the consolidated profit or loss statement. Provision for impairment of goodwill is not cancelled in subsequent periods.
During the sale of the related cash generating unit, the amount determined for goodwill, profit/loss in the sale process it is included in the calculation.
Bank borrowings
Bank borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Any difference between proceeds, net of transaction costs, and the redemption value is recognised in the statement of profit or loss over the borrowing period.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Share capital, dividends and share premium
Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. Share premium represents the difference between nominal value of the publicly held shares and their sales prices.
Taxes on income
Taxes include current period income taxes and deferred taxes. Current year tax liability consists of tax liability on period income calculated based on currently enacted tax rates as at reporting date and according to tax legislation in force and includes adjustments related to previous years’ tax liabilities.
Deferred tax is recognised, using the liability method, for temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Tax bases of assets and liabilities comprise of the amounts that will affect the future period tax charges based on the tax legislation. Currently enacted tax rates, which are expected to be effective during the periods when the deferred tax assets will be utilised or deferred tax liabilities will be settled, are used to determine deferred income tax.
Deferred tax liabilities are recognised for all taxable temporary differences, where deferred tax assets resulting from deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Carrying value of deferred tax assets are decreased to the extent necessary, if future taxable profits are not expected to be available to utilise deferred tax assets partially or fully.
Deferred tax assets and deferred tax liabilities related to income taxes levied by the same taxation authority are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities.
Revenue recognition
Revenue is recognized in the consolidated financial statements in accordance with the following fivestage model.
• Defining contracts with customers
• Defining enforcement obligations in contracts
• Determination of transaction price in contracts
• Distribution of transaction price to enforcement liabilities
• Revenue recognition
The Group sells cast iron, aluminum and wheels for the automotive industry. Group, above considering the five-stage model described, the sales revenue of the products exported to foreign customers and foreign customers ‘ supply chain partners to be shipped to domestic storage is recognized when the goods are delivered to the customers or to the said warehouses in a timely manner.
Net sales are calculated by deducting discounts and commissions.
The Group sells scrap aluminium to its suppliers in return for purchase of liquid aluminium. The sales of scrap aluminium are not presented as sales revenue; instead they are offset against the cost of scrap aluminium under the cost of sales.
44
CONSOLIDATED FINANCIAL STATEMENTS
Interest income
Interest income is recognised using the effective interest method.
Events after the reporting date
Events after the reporting date are those events, favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue.
The Group records adjusting events after the reporting date and disclose non-adjusting events after the reporting date on the accompanying financial statements.
Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance costs in consolidated statement of profit or loss and other comprehensive income.
A contingent asset and liability is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity and not recognised in the consolidated financial statements. Provisions shall not be recognised for future operating losses.
Employee benefits / provision for employment termination benefit
Under Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Group. Such payments are considered as being part of defined retirement benefit plan as per International Accounting Standard No. 19 (revised) “Employee Benefits” (“TAS 19”).
The retirement benefit obligation recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses. All actuarial differences are recognized immediately in other comprehensive income.
Finance leases
Leases of property, plant and equipment where the Group substantially assumes all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges to achieve a constant rate on the finance balance outstanding. The corresponding lease obligations, net of finance charges, are included as finance lease obligations. The interest element of the finance cost is charged to the statement of comprehensive income over the lease period. The property, plant and equipment acquired under finance leases are depreciated over the useful life of the asset.
Obligations under finance leases are stated in the consolidated financial statements at the acquisition values of the related property, plant and equipment. The finance leases costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset in the period in which the asset is prepared for its intended use or sale.
Research and development expenses
Research expenditure is recognised as expense as incurred. Costs incurred on development projects (relating to the design and testing of developed products) are recognised as intangible assets when it is probable that the project will be completed satisfactorily considering its commercial and technological feasibility, and only if the cost can be measured reliably. Other development expenditures are recognised as expense as incurred. Development costs previously recognised as expense are not recognised as
an asset in subsequent periods.
Related parties
For the purpose of these consolidated financial statements, shareholders, key management personnel and members of the Board, their family members and companies, subsidiaries and partnerships managed or controlled by them are considered and referred to as related parties (Note 28). The related party transactions with companies and individuals during the period are disclosed in the notes even if such parties are not considered to be related parties as at period-end.
Earnings per share
Earnings per share are calculated by dividing net profit by the weighted average number of ordinary shares outstanding during the year.
In Turkey, companies may raise their share capital by distributing “bonus shares” to shareholders from retained earnings. In computing earnings per share, such “bonus share” distributions are assessed as issued shares. Accordingly, the retrospective effect for those share distributions is taken into consideration in determining the weighted-average number of shares outstanding used in this computation.
Reporting of cash flows
In the consolidated statement of cash flows, cash flows during the period are classified under operating, investing or financing activities.
The cash flows raised from operating activities indicate cash flows due to the Group’s operations.
The cash flows due to investing activities indicate the Group’s cash flows that are used for and obtained from investments (investments in property, plant and equipment and financial investments).
The cash flows due to financing activities indicate the cash obtained from financial arrangements and used for redemption.
Cash and cash equivalents include cash and bank deposits and the investments that are readily convertible into cash and highly liquid with less than 3 months to maturity (Note 4).
Segment reporting
A reportable segment is a business segment or a geographical segment identified based on the foregoing definitions for which segment information is required to be disclosed. A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Since there is not a geographical segmentation in the Group’s organizational and management structure and internal financial reporting for the Board of Directors, geographical segment reporting is not performed.
A business segment or geographical segment should be identified as a reportable segment if a majority of its revenue is earned from sales to external customers and if its revenue from sales to external customers and from transactions with other segments is 10% or more of the total revenue, external and internal, of all segments; or its segment result, whether profit or loss, is 10% or more of the combined result of all segments in profit or the combined result of all segments in loss, whichever is the greater in absolute amount; or its assets are 10% or more of the total assets of all segments.
2.8. Significant accounting estimates and assumptions
Preparation of consolidated financial statements requires use of estimates and assumptions that may affect the amount of assets and liabilities recognized as at reporting date, contingent assets and liabilities disclosed and amount of
45
revenue and expenses reported. Although, these estimates and assumptions rely on the Group management’s best knowledge about the current events and transactions, actual outcome may vary from those estimates and assumptions. The Group’s significant accounting estimates are as follows:
(a) Useful lives of property, plant and equipment and intangible assets
Depreciation of property, plant and equipment, except machinery and equipment, is calculated using straight-line method over their useful lives. Useful lives are based on management’s best estimates, are revised at each reporting date and the necessary corrections are made. Useful lives of each reporting period, the capacity utilization rate, and economic, technological developments are taken into account and the revised and necessary updates are reflected to the consolidated financial statements, prospectively.
The Group, reassesses useful lives and depreciation expense of machinery and equipment taking into consideration the capacity utilization rate and condition of machinery and equipment, and, if necessary updates them in accordance with TAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”.
(b) Income taxes
There are many transactions and calculations whose effects are not definite to the ultimate tax liability during the ordinary course of business and such situations require significant judgement in determining the provision for income taxes. The Group recognizes possible additional tax liabilities as a result of taxable situations (Note 26). Where the final tax liability that has to be recognized is different from the liability that was initially recognized, such differences will impact the income tax and deferred tax income/loss in the current period.
(c) Employment termination benefit discount rate
The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. Discount rate depends on best estimates of management, reviewed in each financial period and necessary adjustments are made.
The Group estimated the discount rate which has been used in calculating provision for employment termination benefit as at 31 December 2018 as 5,09%, calculated by an independent actuary company.
d) Value added tax carried forward
As at 31 December 2018, the Company has a total value added tax (“VAT”) receivable of TL 17.019.449 (31 December 2017: TL 18.791.962) consisting of the Company’s investments, sales, and purchases and resulting from various VATs (Note 17). The Company shall apply to the relevant tax office in order to net-off the VAT receivables or receive a VAT refund for 2018. Therefore, in accordance with a management decision, the relevant VAT receivables were classified under current assets and non-current assets in the statement of financial position.
e) Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
The Company regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Company assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of TFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values of land, land improvements and buildings is included in the accounting policies.
f) Impairment of financial assets
The estimations and assumptions used for the impairment of financial assets are explained in Note 2.7.
3. SEGMENT REPORTING
Operating segments are evaluated in line with to the internal reporting and strategic divisions that are presented to competent organs or authorities to make decisions regarding the Group’s operations. The aforementioned competent organ, which is authorized to make strategic decisions, is defined as the Board of Directors of the Company. The Group management determines operating segments according to the reports, which are evaluated during the Board of Directors’ decision making process. The Group’s top executives follow the operation results as industrial segments. The Group considers high pressure, gray cast iron and wheel division as three separate business segments and provides segmental information in accordance with the requirements of the accounting framework used. The Group’s top executives do not follow the operation results geographically, thus there is no geographical segment reporting.
Segment assets: 31 December 2018 31 December 2017
Gray cast iron 931.691.582 718.752.481High pressure 297.902.281 229.816.398Wheel 107.366.275 82.827.598Unallocated assets (*) 22.776.165 17.107.532Total assets per consolidated financial statements 1.359.736.303 1.048.504.009
(*) As at 31 December 2018, unallocated assets consist of loans and interests of loans landed to Componenta Oyj amounting to TL 14.585.849 (31 December 2017: TL 10.551.157) and financial investments in Kumsan amounting to TL 8.190.316 (31 December 2016: TL 5.637.272). (Balance at 31 December 2017, current tax receivable amounting to TL 919.103).
Segment liabilities: 31 December 2018 31 December 2017
Gray cast iron 141.711.447 144.192.051High pressure 47.372.826 48.202.069Wheel 14.586.909 14.842.247Unallocated liabilities (*) 1.027.181.538 793.627.885Total liabilities per consolidated financial statements 1.230.852.720 1.000.864.252
(*) As at 31 December 2018 and 31 December 2017, unallocated liabilities consist of bank borrowings and deferred tax liabilities.
46
CONSOLIDATED FINANCIAL STATEMENTS
Segmental analysis for the year ended 31 December 2018:
Gray cast iron High pressure Wheel TotalExternal revenues 827.328.524 184.729.345 167.814.212 1.179.872.081Operating expenses (719.836.203) (171.170.952) (145.277.483) (1.036.284.638)
Operating profit 107.492.321 13.558.393 22.536.729 143.587.443
Other operating income, net 53.030.102Finance costs (111.125.698)Finance income 18.029.957Share of profit of equity-accounted investees 820.385Income from investing activities 5.545.400
Profit before tax 109.887.589
Tax income (8.656.716)
Net profit for the year 101.230.873
Segmental analysis for the year ended 31 December 2017:
Gray cast iron High pressure Wheel TotalExternal revenues 733.714.696 177.550.328 155.065.753 1.066.330.776Operating expenses (636.302.472) (160.335.897) (125.524.125) (922.162.494)
Operating profit 97.412.223 17.214.431 29.541.628 144.168.282
Other operating income, net (6.346.133)Finance costs (71.883.170)Finance income 8.070.387Share of profit of equity-accounted investees 781.531Income from investing activities 2.401.564
Profit before tax 77.192.461
Tax income (9.064.687)
Net profit for the year 68.127.774
31 December 2018 Gray cast iron High pressure Wheel TotalDepreciation and amortization 22.268.413 16.325.046 3.746.627 42.340.085Capital expenditures 16.141.254 11.025.984 5.415.715 32.582.953
1 Ocak-31 Aralık 2017
Depreciation and amortization 20.458.860 13.285.671 2.777.650 36.522.181Capital expenditures 3.535.782 20.945.103 539.181 25.020.066
31 December 2018
31 December 2017
Cash 44.601 18.655Banks 27.696.816 17.445.443
Time deposits – Other foreign currency 865.000 --Demand deposits – EUR 24.981.962 14.677.947Demand deposits – Other foreign currency 1.849.854 2.767.496
27.741.417 17.464.098
As at 31 December 2018, The Group has 865.000 Turkish Lira time deposits in bank accounts. The interest rate of the time deposit is 22.5% and the maturity is 2 January 2019. As at 31 December 2017, there are no time deposits in the Group’s bank accounts. As at 31 December 2018 and 31 December 2017, there are no blockages on bank accounts.
Currency and interest rate risk and sensitivity analysis for the Group’s financial assets and liabilities are described in Note 29.
4. CASH AND CASH EQUIVALENTS
As at 31 December 2018 and 31 December 2017, the details of cash and cash equivalents were as follows:
47
Short-term bank loans and factoring payables
31 December 2017Annual
average interest rate %
Amount in original TL
Short-term Euro borrowings (*) 5,37 39.211.106 177.057.748Short-term TL borrowings 23,46 11.245 11.245Total short-term bank loans and factoring payables 177.068.993
31 December 2018Annual
average interest rate %
Amount in original TL
Short-term Euro borrowings (*) 6,51 32.914.771 198.410.240Total short-term bank loans and factoring payables
198.410.240
(*) Current short-term borrowings consist of working capital loan and bank borrowings obtained from Exim Bank.
31 December 2018Annual average
interest rate %Amount in
original TLLong-term Euro bank loans 6,26 79.300.834 478.025.427
Long-term bank loans 478.025.427
31 December 2017Annual average
interest rate %Amount in
original TLLong-term Euro bank loans 6,39 131.587.555 594.183.605
Long-term bank loans 594.183.605
31 December 2018
31 December 2017
Up to 1 year 521.936.297 187.890.3571 to 2 years 47.348.768 240.192.6623 to 4 years 85.713.381 63.405.129Over 4 years 344.963.278 290.585.814
999.961.724 782.073.962
Redemption schedules of short-term and long-term borrowings at 31 December 2018 and 31 December 2017 were as follows:
31 December 2018Annual average
interest rate %Amount in
original TLShort-term portion of long-term Euro bank loans 5,66 53.670.547 323.526.057
Short-term portion of long-term bank loans
323.526.057
31 December 2017Annual average
interest rate %Amount in
original TLShort-term portion of long-term Euro bank loans 5,25 1.123.101 5.071.364Short-term portion of long-term TL bank loans 23,46 5.750.000 5.750.000
Short-term portion of long-term bank loans
10.821.364
As of 31 December 2018, the Group’s bank loans are secured. The details of guarantees are explained in Note 15.b
Short-term portion of long term bank loans
Long-term bank loans
31 December 2018
31 December 2017
Short-term bank loans and factoring payables 198.410.240 177.068.993Short-term financial lease liabilities 13.399.581 13.515.126
211.809.821 190.584.119Short-term portions of long-term bank loans 323.526.057 10.821.364Total short-term borrowings 535.335.878 201.405.483
Long-term bank loans 478.025.427 594.183.605Long-term financial lease liabilities 1.969.053 11.760.642Total long-term borrowings 479.994.480 605.944.247
Total financial liabilities 1.015.330.358 807.349.730
31 December 2018
31 December 2017
Variable interest rate loans 340.700.308 650.859.573Fixed interest rate loans 659.261.416 131.214.389
999.961.724 782.073.962
Details of the Group’s variable and fixed interest rate loans as at 31 December 2018 and 31 December 2017 were as follows:
On 27 September 2017, the Company completed the process of restructuring
its existing loans with the lending banks and the use of new loans. The loan
package renewed with the same banks under the auspices of Döktaş Metal
was revised with the new loan package signed on 29 June 2018 and it was
transferred to Çelik Holding A.Ş.
As at 31 December 2018, TL 312,134,186, equivalent of EUR 51,780,721,
included in the short-term bank loans was used as a renewable loan for the
refinancing of working capital needs.
The Group has financial and non-financial covenants in the loan agreement.
Guarantees given for the bank loan agreement are disclosed in Note 15.
There are two financial covenants to be fulfilled by the Group. These financial
covenants are Debt Service Coverage Ratio and Leverage Ratio.
Debt Service Coverage Ratio means the ratio of the amount calculated by
deducting the taxes paid in connection with related calculation period from
earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)
to the aggregate of all due amounts which are defined within the financial
indebtedness, including without limitation principal, interest, fees, expenses,
commissions and the breakage cost and indemnification, which are paid,
accrued or have to be paid. Debt Service Coverage Ratio shall not be less than
1.20.
Leverage ratio means the rate of net Financial Debt, to Earnings before
Interest, Taxes, Depreciation and Amortization. The parties agree that no
lower limit for the Net Financial Debt / EBITDA ratio for the year 2017 will be
determined. However, the lower limits for the Net Financial Debt / EBITDA ratio
will be determined for the year 2018 and the following periods by the lenders
considering the 12 month EBITDA between 1 January 2018 and 31 December
2018. The lower limits determined shall be notified written to the Group and it
will be legally binding.
In case the Group fails to fulfil one of the obligations above, an event of default
will be occured.
5. SHORT AND LONG TERM BORROWINGS
As at 31 December 2018 and 31 December 2017, the details of financial liabilities measured at amortized cost were as follows:
48
CONSOLIDATED FINANCIAL STATEMENTS
Redemption schedules of finance lease liabilities are as follows:
31 December 2018
31 December 2017
Minimum financialleasing payment Interest
Totalliabilities
Minimum financialleasing payment Interest
Totalliabilities
Short-term portion
2018 -- -- -- 14.668.093 (1.152.967) 13.515.1262019 14.008.998 (609.417) 13.399.581 -- -- --
Short-term portion 14.008.998 (609.417) 13.399.581 14.668.093 (1.152.967) 13.515.126
Long-term portion
2019 -- -- -- 9.931.761 (412.653) 9.519.1072020 2.045.090 (76.037) 1.969.053 2.282.617 (41.082) 2.241.535
Long-term portion 2.045.090 (76.037) 1.969.053 12.214.378 (453.736) 11.760.642
16.054.088 (685.454) 15.368.634 26.882.471 (1.606.703) 25.275.768
Financial lease liabilities are denominated in Euro and the interest rates are between 4.30% and 6.00%.Currency and interest rate risk and sensitivity analysis for the Group’s financial assets and liabilities are described in Note 29.
6. TRADE RECEIVABLES AND PAYABLES
As at 31 December 2018 and 31 December 2017, the details of the Group’s trade receivables were as follows:
7.OTHER RECEIVABLES AND PAYABLES
Other Receivables
Short-term other receivables:
As at 31 December 2018 and 31 December 2017, the details of short-term other receivables were as follows:
(*) Receivables from Componenta Oyj group companies have been reclassified to receivables from third parties after transfer of the Company’s shares.
31 Aralık 2018
31 Aralık 2017
Short-termReceivables from third parties (*) 163.068.070 127.668.412
- Customer accounts 163.068.070 127.583.258- Income accruals -- 85.154
Less: Provision for doubtful receivables (9.066.359) (3.955.163)Short-term trade receivables 154.001.711 123.713.249
Long-termCustomer accounts 164.910.226 121.110.004Less: Provision for doubtful receivables (3.189.403) --Long-term trade receivables 161.720.823 121.110.004Total 315.722.534 244.823.253
Aging analysis for trade receivables
As at 31 December 2018 and 31 December 2017, maturities of trade receivables were as follows:
As at 31 December 2018 and 31 December 2017, overdue days of receivables are as follows:
For the years ended 31 December 2018 and 31 December 2017, the movements of provision for doubtful receivables were as follows:
Trade payables
As at 31 December 2018 and 31 December 2017, the details of the Group’s trade payables were as follows:
Trade receivables have approximately 1-2 months of maturity terms on average (31 December 2017: 1-2 month). The Group’s currency and interest rate risks are explained in Note 29.
Trade Payables have approximately 1-4 months of maturity terms on average (31 December 2017: 1-4 month). The Group’s currency and interest rate risks are explained in Note 29.
31 December 2018
31 December 2017
Overdue receivables 40.557.914 29.542.2270-30 days maturity 35.702.419 27.932.56431-90 days maturity 56.323.453 44.065.87991 days and over 183.138.748 143.282.583
315.722.534 244.823.253
Days overdue31 December
201831 December
2017
0 – 1 month 11.856.046 8.352.9831 – 3 months 15.856.571 19.757.9973 months and over 12.845.297 1.431.247
40.557.914 29.542.227
2018 20171 January 3.955.163 3.722.736Provision cancelled -- 2.352.306TFRS 9 application opening effect (Note 2.5) 8.582.300 --Collections (4.221.694) (2.877.361)Foreign exchange difference 3.939.993 757.482
31 December 12.255.762 3.955.163
31 December 2018
31 December 2017
Payables to related parties (Note 28.b) 7.058.487 238.329Payables to third parties 87.207.823 101.079.476- Trade payables 86.734.276 63.957.586- Notes payable 473.547 37.121.890
94.266.310 101.317.805
31 December 2018
31 December 2017
Deposits and guarantees given 1.335.268 1.473.7151.335.268 1.473.715
31 December 2018
31 December 2017
Financial receivables from non-related parties (*) 14.585.849 10.551.15714.585.849 10.551.157
(*) Consist of the financial receivables from Componenta Oyj.
Guarantee letters taken from the customers related with trade receivables are amounting to TL 250.000 (31 December 2017: TL 190.000), and the long-term notes payable are amounting to TL 400.000 (31 December 2017: TL 400.000).
Long-term other receivables:
As at 31 December 2018 and 31 December 2017, the details of long-term other receivables were as follows:
49
8. PAYABLES RELATED TO EMPLOYEE BENEFITS
As at 31 December 2018 and 31 December 2017, the payables related to employee benefits were as follows:
10. PREPAID EXPENSES
Short-term prepaid expenses
As at 31 December 2018 and 31 December 2017, the details of the short-term prepaid expenses were as follows:
11. EQUITY-ACCOUNTED INVESTEESR
Investment in associates:
As at 31 December 2018 and 31 December 2017, the details equity-accounted investees were as follows:
For the year ended 31 December, movements of the equity-accounted investees are as follows:
Information related with the financial statements of Kumsan were as follows:
9. INVENTORIES
As at 31 December 2018 and 31 December 2017, the details of the inventories were as follows:
(*) Other inventories consist of models and molds produced on order.(**) Consists of net realizable value difference.
For the years ended 31 December 2018 and 31 December 2017, movements of impairment provision were as follows:
For the period from 1 January to 31 December 2018, a portion amounting to TL 456.532.667 of the cost of goods sold is related to raw material and supplies usage (1 January - 31 December 2017: TL 388.715.307). Impairment provisions and cancellations on inventory are included in cost of sales.
Management Fee Investigation
On 18 December 2015, the Ministry of Finance declared the Company the inspection of the Company’s accounts and transactions for the years 2010, 2011, 2012, 2013, 2014 and 2015 based on tax regulations. Within the scope of inspection, management fee invoices by Componenta Oyj and other information about these invoices have been requested. According to this declaration related accounts have been started to be inspected by tax inspectors on 22 December 2015.
In accordance with the related report dated 26 January 2016, the total amount of TL 11,483,259.61 for Withholding and VAT Tax Principle and the total amount of TL17,224,889.42 for such tax penalty have been notified to the Group by Bursa Ertuğrulgazi Tax Office and Bursa Orhangazi Tax Office for penalty notice on 28-30 September 2016 The Group has been notified.In accordance with the ”Communiqué on Law No. 6736 Regarding Restructuring of Some Receivables and the General Law on the mentioned Banks”, tax reduction has been applied for the reduction of tax penalty, reduction of delinquency and for installments. The total tax liability to be paid by the Group have been reduced to TL 7.024.161 to be paid in 6 installments in total within 2 months period.As at 31 December 2018, amounting to TL 5.532.702 of the debts was paid.
31 Aralık 2018 31 Aralık 2017 Payables to the personnel 7.783.366 5.667.987Payables to social security institution 3.645.451 6.074.589Personnel income tax and stamp tax payables 3.341.073 3.332.615
14.769.890 15.075.191
31 December 2018
31 December 2017
Raw materials 69.211.308 51.317.343Work-in-progress 9.564.610 15.288.607Finished goods 67.966.664 47.912.824Other (*) 20.445.535 8.267.849
167.188.117 122.786.623
Less: Provision for net realisable value of inventories (**)
(1.003.602) (1.635.668)
166.184.515 121.150.955
2018 2017Balance at 1 January 1.635.668 718.892Provision for diminution in value of inventories during the period
--760.666
Reversal of impairment losses (1.111.611) --Foreign currency translation differences 479.545 156.110Balance at 31 January
1.003.602 1.635.668
31 December 2018
31 December 2017
Deferred finance costs (*) 5.840.266 1.900.105Advances given to suppliers 523.568 510.342Prepaid expenses for the following months 265.805 396.691
6.629.639 2.807.138
Long-term prepaid expenses
As at 31 December 2018 and 31 December 2017, the details of the long-term prepaid expenses were as follows:
31 December 2018
31 December 2017
Deferred finance costs (*) 13.140.604 6.175.343Advances given to suppliers -- 3.059.531
13.140.604 9.234.874(*) As at 31 December 2018 and 31 December 2017, deferred finance costs consist of prepaid commission and lawyer expenses on loan amounting to Euro 120.000.000.
31 December 2018 31 December 2017Associate
Share %Associate
AmountAssociate
Share %Associate
AmountKumsan 25,10 8.190.316 25,10 5.637.272
2018 2017
1 January - Investment in associates 5.637.272 4.060.133Share of profit of equity-accounted investees 820.385 781.531Dividends received (155.585) (90.360)Foreign currency translation differences 1.888.244 885.968
31 December - Investment in associates 8.190.316 5.637.272
31 December 2018 31 December 2017Total assets Total liabilities Total assets Total liabilities
Kumsan 35.496.484 2.865.742 25.412.055 2.952.803
2018 2017Revenue Net income Revenue Net income
Kumsan 23.352.608 2.648.609 30.979.569 2.772.401
Other payables
As at 31 December 2018 and 31 December 2017, the details of short-term and long-term other payables were as follows:
31 December 2018
31 December 2017
Installments of tax liabilities of prior periods 1.005.886 865.562Other refundable VAT 8.435.053 5.395.648
Short-term other payables 9.440.939 6.261.210
31 December 2018
31 December 2017
Installments of tax liabilities of prior periods 485.573 363.737
Long-term other payables 485.573 363.737
50
CONSOLIDATED FINANCIAL STATEMENTS
Lands
Buildings andland
improvements
Machineryand
equipmenFurniture and
fixturesMotor
vehiclesConstruction
in progress Total
Opening net carrying value, 1 January 2017 101.308.404 92.585.490 275.183.575 14.839.746 62.818 25.830.615 509.810.648
Additions -- 19.618 8.022.006 1.374.715 -- 12.681.492 22.097.831
Disposals -- (60.236) (17.161.523) (1.106.429) (17.052) -- (18.345.240)
Transfers -- -- 20.068.934 144.556 -- (20.213.490) --
Foreign currency translation differences 21.998.989 20.104.820 59.755.735 3.222.430 13.645 5.609.085 110.704.704
Depreciation charge -- (6.069.837) (22.767.925) (4.190.024) (28.763) -- (33.056.549)
Disposals from accumulated depreciation -- 37.721 14.686.593 1.106.429 8.132 -- 15.838.875
Closing net carrying value, 31 December 2017 123.307.393 106.617.576 337.787.395 15.391.423 38.780 23.907.702 607.050.269
Opening net carrying value, 1 January 2018 123.307.393 106.617.576 337.787.395 15.391.423 38.780 23.907.702 607.050.269
Disposals 859.189 746.231 14.106.597 3.071.421 160.602 9.879.201 28.823.241
Transfers -- -- (25.528.266) -- -- -- (25.528.266)
Foreign currency translation differences -- 18.793 20.504.048 427.562 -- (21.324.859) (374.456)
Yabancı para çevrim farkları 41.302.721 35.712.344 113.127.592 5.144.502 12.988 7.957.939 203.258.086
Revaluation of property plant and equipment (21.774.946) 8.384.153 -- -- -- -- (13.390.793)
Depreciation charge -- (7.666.612) (26.266.708) (4.607.332) (50.114) -- (38.590.766)
Disposals from accumulated depreciation -- -- 16.041.367 -- -- -- 16.041.367
Closing net carrying value, 31 December 2018 143.694.357 143.812.485 449.772.025 19.427.576 162.256 20.419.983 777.288.682
Net book value
31 December 2017 123.307.393 106.617.576 337.787.395 15.391.423 38.780 23.907.702 607.050.269
31 December 2018 143.694.357 143.812.485 449.772.025 19.427.576 162.256 20.419.983 777.288.682
TL 40.148.853 (31 December 2017: TL 35.246.122) of the current period depreciation and amortisation expenses have been reflected to costs of goods sold and TL 2.191.232 (31 December 2017: TL 1.276.059) to operating expenses.
12. PROPERTY PLANT AND EQUIPMENT
For the years ended 31 December 2018 and 31 December 2017, movements of property, plant and equipment were as follows:
13. INTANGIBLE ASSETS
For the years ended 31 December 2018 and 31 December 2017, movements of intangible assets were as follows:
Fair value of land and buildings and land improvements of the Group has been determined according to valuations at 31 December 2018. Valuation companies which are the independent companies authorized by CMB, are sufficient for the appropriateness of the valuation. Valuations made in accordance with
International Valuation Standards in valuation reports were determined by the method of cost approach.
The fair value of land, land improvements and buildings are as determined as follows:
Level 1: Land and buildings and land improvements are valued at quoted prices in active markets for identical assets or liabilities.
Level 2: Land and buildings and land improvements are valued directly from the inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Land and buildings and land improvements are valued using inputs for the asset or liability that are not based on observable market data.
The fair value measurement of land and buildings and land improvements are categorized as Level 3 fair value based on the inputs to the valuation technique used.
Rights TotalCost
1 January 2017 opening balance 15.771.282 15.771.282
Additions 2.922.235 2.922.235
Translation differences 385.738 385.738
31 December 2017 closing balance 19.079.255 19.079.255
1 January 2018 opening balance 19.079.255 19.079.255
Additions 3.759.712 3.759.712
Transfer 374.454 374.454
Translation differences 758.120 758.120
31 December 2018 closing balance 23.971.541 23.971.541
Rights TotalAccumulated Amortization
1 January 2017 opening balance 12.479.684 12.479.684
Additions 3.465.632 3.465.632
Translation differences (329.030) (329.030)
31 December 2017 closing balance 15.616.286 15.616.286
1 January 2018 opening balance 15.616.286 15.616.286
Additions 3.749.319 3.749.319
Translation differences (401.825) (401.825)
31 December 2018 closing balance 18.963.780 18.963.780Net carrying value
31 December 2017 3.462.969 3.462.969
31 December 2018 5.007.761 5.007.761
51
14. GOODWILL
Goodwill is amounting to TL 6.834.872 as at 31 December 2018 (31 December 2017: TL 5.119.918). Goodwill has arisen due to the acquisition of Componenta UK Ltd. shares in 2006.
15. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES
a) Short-term provisions:
As at 31 December 2018 and 31 December 2017, the details of other current provisions were as follows:
b) Guarantee Letters, Pledges and Mortgages (“GPM”) Given by the Group:
The Group’s guarantee letters/ pledges/ mortgages (GPMs) position as at 31 December 2018 and 31 December 2017 were as follows:
2018 20171 January 5.119.918 4.206.485Translation Differences 1.714.954 913.433
31 December 6.834.872 5.119.918
31 December 2018
31 December 2017
Provisions for litigation (1) 7.435.107 6.156.625Unused vacation pay liability (2) 3.639.188 2.667.314Provisions for energy and water expenses (3) 596.985 394.408Other short-term provisions (4) 2.966.169 9.599.046
14.637.449 18.817.393
(1) There were lawsuits filed against the Group due to work accidents. The Group management has made employers’ liability insurance in relation to these work accidents and the related provisions were reflected to the consolidated financial statements as at 31 December 2018 and 31 December 2017 by deducting the compensable amount of insurance from estimated payments.
(2) In Turkey, according to the legislation, the employer has to make payments for unused vacation days when the personnel leave the company.
(3) As at 31 December 2018, provision consists of not invoiced electricity, natural gas and water expense accruals for the year 2018.
(4) As at 31 December 2018, other short term provisions consist of uninvoiced provisions based on consultancy services.
As at 31 December 2018 and 31 December 2017, movements of provisions of the Group were as follows:
Related with goodwill occurred in acquisition of Componenta UK Ltd, the Group compared value in use of cash generating unit with goodwill carried in the consolidated statement of financial position and concluded that there is no impairment.
1 January 2018 AdditionsForeign currency
translation differencesUnutilized
Portion/Utilization31 December
2018Provisions for litigation 6.156.625 -- 2.016.819 (738.337) 7.435.107Unused vacation pay liability 2.667.314 73.894 897.980 -- 3.639.188Provisions for energy and water expenses 394.408 66.386 136.191 -- 596.985Other short-term provisions 9.599.046 -- 2.644.941 (9.277.818) 2.966.169
Total 18.817.393 140.280 5.695.931 (10.016.155) 14.637.449
1 Ocak 2017 İlavelerYabancı para çevrim farkı
Konusu kalmayan karşılık/Kullanım
31 Aralık 2017
Provisions for litigation 4.859.510 1.135.655 161.460 -- 6.156.625Unused vacation pay liability 1.089.264 1.341.519 236.531 -- 2.667.314Provisions for energy and water expenses 2.087.279 -- 169.933 (1.862.804) 394.408Other short-term provisions 1.965.656 7.280.698 1.431.731 (1.079.042) 9.599.046
Total 10.001.709 9.757.872 1.999.655 (2.941.846) 18.817.393
31 December 2018Total
TL equivalentOriginal
Currency TLOriginal Currency
US DollarOriginal Currency
EURA. GPMs given on behalf of the Company’s legal personality 7.760.959.529 3.330.379.529 -- 735.000.000
B. GPMs given in favour of subsidiaries included in full consolidation -- -- -- --
C. GPMs given by the Company for the liabilities of third parties in order to run ordinary course of business -- -- -- --
D. Other GPMs -- -- -- --i. GPMs given in favour of parent company -- -- -- --ii. GPMs given in favour of group companies not in the scope of B and C above -- -- -- --iii. GPMs given in favour of third-party companies not in the scope of C above -- -- -- --
Other -- -- -- --
Total GPMs 7.760.959.529 3.330.379.529 -- 735.000.000
Other GPMs -- -- -- --
52
CONSOLIDATED FINANCIAL STATEMENTS
c) Collaterals Received:
Letters of guarantees received consist of guarantees received from customers, suppliers and subcontractors.
31 December 2017Total TL
equivalentOriginal
Currency TLOriginal
Currency US DollarOriginal
Currency EURGPMs given on behalf of the Company’s legal personality 2.843.075.452 1.330.382.952 -- 335.000.000
B. GPMs given in favour of subsidiaries included in full consolidation -- -- -- --
C. GPMs given by the Company for the liabilities of third parties in order to run ordinary course of business -- -- -- --
D. Other GPMs -- -- -- --i.GPMs given in favour of parent company -- -- -- --ii.GPMs given in favour of group companies not in the scope of B and C above -- -- -- -- iii.GPMs given in favour of third-party companies not in the scope of C above -- -- -- --
Other -- -- -- --
Total GPMs 2.843.075.452 1.330.382.952 -- 335.000.000
Other GPMs -- -- -- --
Ratio of other GPMs given by the Group to the Group’s equity is 6022% as at 31 December 2018 (31 December 2017: 6564%).
As at 31 December 2018, lender banks Vakıfbank, Halk Bankası, İş Bankası and Ziraat Bankası have first degree and first ranking mortgage in the amount of EUR 270.000.000 and second degree and first ranking mortgage in the amount of TL 400.000.000, pursuant to the participation ratio on all of the property, plant and equipment of the Group under the contract dated 13 August 2014. With amending agreement dated 17 June 2015, amount of existing mortgages have been in-creased on first degree and first ranking to EUR 285.000.000 and second degree and first ranking to TL 500.000.000. With amending agreement dated 4 October 2016, amount of existing mortgages have been increased on first degree and first ranking to EUR 285.000.000, second degree and first ranking to TL 500.000.000 and third degree and first ranking to EUR 50.000.000 and TL 100.000.000.
Other than that, same banks have first degree and first ranking mortgage in the amount of TL 400.000.000 on portable business facilities, trade name, company name, patent rights, brands, models, paintings, licenses and every kind of accessories, fixtures, essential part, syllabus and details without recourse, jointly and pursuant to the participation ratio. With amending agreement dated 17 June 2015, amount of existing pledge of assets have been increased TL 600.000.000 with the same scope.
In accordance with the supplemental agreement dated 24 November 2016, the commercial enterprise pledge was amended and increased to TL 720.000.000 TL with the previous scope has been valid.
Letters of guarantees given which are amounting to TL 10.379.529 were composed of guarantees given to the Undersecretariat Customs, customs offices, cham-ber of commerce, tax authorities, electricity and natural gas suppliers, raw material suppliers and law courts related with ongoing legal cases.
31 December 2018
31 December 2017
Guarantee letters received 3.752.726 6.553.624Guarantee cheques and notes received 5.020.061 4.593.890
Total guarantees received 8.772.787 11.147.514
Provision for employment termination benefit is accounted according to the following disclosures:
Under Turkish Labor Law, the Company is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men).
The amount payable consists of one month’s salary limited to a maximum of TL 5.002 for each year of service as at 31 December 2018 (31 December 2017: TL 4.732).
The liability is not funded in legally and there is no funding requirement.
The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The following actuarial assumptions were used in the calculation of the total liability:
The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Since the liability cap for each year of service is adjusted once in every six months the maximum amount of TL 5.002, which is effective from 1 January 2018.
(1 January 2017: TL 4.732), has been considered in the calculation.
For the years ended 31 December movements of provision for employment termination benefits were as follows:
16. EMPLOYEE BENEFITSLong term provisions related to Employee benefits
31 December 2018
31 December 2017
Provision for employment termination benefits 51.350.736 35.016.81751.350.736 35.016.817
31 December 2018
31 December 2017
Annual discount rate (%) 5,09 4,70Turnover rate to estimate the probability of retirement (%)
95 95
2018 2017
1 January 35.016.817 33.577.659Interest cost 4.739.358 3.470.692Current year service cost 2.808.402 2.249.557Actuarial loss 35.377.375 5.984.955Foreign currency translation differences (9.643.581) (4.952.188)Payments during the period (16.947.635) (5.313.858)31 December 51.350.736 35.016.817
53
17. OTHER ASSETS AND LIABILITIES
Other current assets
As at 31 December 2018 and 31 December 2017, details of other current assets were as follows:
18. SHAREHOLDER’S EQUITYPaid-in Capital
The Company applies registered capital system which is recognized by BIST registered companies. The Company has share capital ceiling amounting to TL 250.000.000 for registered shares with a nominal value of TL 0,01.
The composition of the Company’s statutory paid-in capital at 31 December 2018 and 31 December 2017 are as follows:
Inflation Adjustment Differences on Paid-In Capital
Adjustment to share capital represents the inflation restatement effect of the cash contributions to share capital.
Share Premium
As at 31 December 2018 and 31 December 2017, the Group’s share premium is amounting to TL 161.041.
Gain on Revaluation and Re-measurement
The gain on revaluation and re-measurement reserve relates to the revaluation of property, plant and equipment.
Remeasurements of Defined Benefit Liability
The reserve comprise of actuarial gains or loss from defined benefit plans recognized in other comprehensive income as a result of TAS 19 (2011).
Foreign Currency Translation Differences
Foreign currency translation differences comprises of foreign currency differences arising from the translation of the financial statements.
Prior Year’s Profits
As at 31 December 2018 and 31 December 2017, the Group’s prior year’s profits are amounting to TL 125.860.629 and TL 62.481.740, respectively.
Legal reserves
Legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the Company’s paid-in capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 10% of the paid-in capital. As at 31 December 2018, legal reserves of the Group is amounting to TL 16.035.194 (31 December 2017: TL 16.035.194).
Other Equity Interest
As at 31 December 2016, the Group has recognised the uncollectible portion of the trade and financial receivables from related parties based on the payment capacity of the counterparties which resulted in restructuring due to financial difficulties experienced by the parent and its subsidiaries amounting to TL 429.474.292. In 2017, negotiations with the trustees in the related countries were completed. According to the agreements signed, bad debts have been revised and the difference amounting to TL 5.228.477 which is formed in favor of the Group is classified as equity. As at 31 December 2018, other equity interest is amounting to TL 424.245.815.
As at 31 December 2018 and 31 December 2017, details of trade and financial receivables from related parties and uncollectible portion were as follows:
Other short-term liabilities
As at 31 December 2018 and 31 December 2017, details of other short-term liabilities were as follows:
31 December 2018
31 December 2017
Export Registered VAT Receivables 7.690.432 9.835.716Other 55.397 17.326
7.745.829 9.853.042
Other non-current assets31 December
201831 December
2017
Long Term Export Registered VAT Receivables (*) 9.329.017 8.956.246
9.329.017 8.956.246(*) Long term VAT receivables are estimated to be collected in more than one year in accordance with the Group’s forecasts, thus represented in other non-current assets as at 31 December 2018 and 31 December 2017.
31 December 2018
31 December 2017
Deferred revenue 1.176.485 1.123.849Advances received 1.146.375 2.416.696Other short-term liabilities (*) 1.028.791 1.567.901
3.351.651 5.108.446(*) As at 31 December 2018, TL 204.968 portion of other short-term liabilities consist of liabilities to trade union (31 December 2017: TL 1.201.690).
31 December 2018
31 December 2017
Registered Capital (with historical value) 250.000.000 250.000.000Approved and paid-in capital (nominal value) 66.844.800 66.844.800
The composition of the Company’s paid-in capital at 31 December 2017 and 31 December 2016 were as follows:
31 December 2018
ShareholdingPercentage
(%)31 December
2017
ShareholdingPercentage
(%)
Çelik Holding A.Ş. 64.496.888 96,49 62.543.860 93,57Held by public 2.347.912 3,51 4.300.940 6,43
Total paid-in-capital 66.844.800 100,00 66.844.800 100,00
The Company has 6.684.480.000 shares (31 December 2018: 6.684.480.000
shares) each with the nominal value of Kr 1 as at 31 December 2018. The Com-
pany has no privileged shares. As explained in Note 1, the nominal value of TL
62.543.859 corresponding to 93,57% of the Group’s capital were transferred
to Çelik Holding A.Ş. by Döktaş Metal upon approval of the transfer of the
pledged shares by the Lenders on 29 June 2018. The transfer was registered
on 11 July 2018.
Uncollectible receivablesGross value of
receivables31 December
201831 December
2017Financial Receivables -Componenta Oyj 358.486.398 (347.347.749) (347.347.749)Trade Receivables- Componenta Frammestad 125.406.384 (23.839.157) (23.839.157)Trade Receivables- Componenta B.V. 36.005.094 (36.005.094) (36.005.094)Trade Receivables- Componenta Finland Oy Högfors 22.259.252 (17.053.815) (17.053.815)
542.157.128 (424.245.815) (424.245.815)
54
CONSOLIDATED FINANCIAL STATEMENTS
Dividend:
The Companies whose shares are listed are subject to the following dividend requirement introduced by the CMB:
In accordance with Article 19 of Capital Markets Law No. 6362 which came into effect on 30 December 2012 and CMB Communique on Dividend No. II-19.1 which came into effect as at 1 February 2014, publicly held corporations distribute dividends within the frameworks of the dividend distribution policies determined by their general assemblies and relevant legislation provisions. The assembly may determine different principles based on similar corporations for profit distribution policies of publicly held corporations.
If the legal reserves to be allocated in accordance with the TCC and the dividend determined for the shareholders in the articles of association or the dividend distribution policies are not allocated, a decision to allocate other legal reserves, transfer the profit to the next year, and distribute the dividend to people other than the owners of dividend shares, board members and employees of the corporation, and shareholders, cannot be made. Moreover, if the rate of the dividend determined for the shareholders is not paid in cash, no dividend shall be distributed to these people.
In publicly held corporations dividends shall be distributed equally to all of the shares existing as of the date of distribution regardless of their dates of issuance and acquisition.
In line with the effective regulations, upon the decision of the general assembly corporations distribute dividends according to the dividend distribution policy determined by their general assemblies and the provisions of relevant legislation. The said regulations do not specify a minimum dividend amount. Corporations make dividend payments according to the provisions of their articles of association or dividend distribution policies. In addition, corporations may pay dividends in instalments of equal or different amounts and may distribute dividend advances in cash for the profits shown in their financial statements.
The Company has not distributed dividends during the current year.
19. REVENUE AND COST OF SALES
20. RESEARCH AND DEVELOPMENT EXPENSES, MARKETING EXPENSES AND GENERAL ADMINISTRATIVE EXPENSES
Marketing expenses:
For the years ended 31 December, the details of marketing expenses were as follows:
21. EXPENSES BY TYPE
For the years ended 31 December, details of expenses by nature were as follows:
22. OTHER OPERATING INCOME AND EXPENSES
For the years ended 31 December, details of other operating income were as follows:
General administrative expenses:
For the years ended 31 December, the details of general administrative expenses were as follows:
1 January – 31 December
2018
1 Janurary -31 December
2017Export sales 915.239.674 834.227.550Domestic sales 267.373.527 224.379.806Other sales 26.069.598 24.368.911
Sales revenue (gross) 1.208.682.799 1.082.976.267
Less: Discounts and returns (28.810.718) (16.645.491)
Sales revenue (net) 1.179.872.081 1.066.330.776
Cost of sales (931.795.423) (807.473.506)
Gross profit 248.076.658 258.857.270
1 January – 31 December
2018
1 Janurary -31 December
2017Raw material costs (456.532.667) (388.715.307)Personnel expenses (169.141.380) (149.232.732)General production costs (137.881.695) (109.977.563)Energy expenses (92.815.293) (74.901.609)Depreciation and amortization expenses (40.148.853) (35.246.122)Other (35.275.535) (49.400.173)
(931.795.423) (807.473.506)
1 January -31 December
2018
1 January -31 December
2017Insurance premiums related to freight and customs procedures (22.437.737) (39.665.976)Packaging (10.252.487) (14.708.259)Transportation (3.517.488) (3.030.658)Personnel (1.064.606) (1.006.991)Warehousing (745.702) (1.802.497)License fees (543.760) (2.282.842)Other (2.226.953) (3.821.994)
(40.788.733) (66.319.217)
Cost of sales:
For the years ended 31 December, the details of cost of sales were as follows:
For the years ended 31 December, the details of revenue were as follows:
1 January -31 December
2018
1 January -31 December
2017Personnel (37.427.086) (20.920.409)Information technology services expenses (5.016.155) (4.560.732)Taxes and stamp duty (4.078.109) (3.657.187)Legal counseling expenses (2.720.074) (1.667.352)Subcontractor expenses (2.691.986) (2.525.831)Depreciation and amortization (2.191.232) (1.276.059)Repair, maintenance and cleaning (2.103.839) (756.845)Subscriptions (821.612) (726.894)Travel expenses (652.364) (141.065)Notification payments (555.942) (405.811)Public holiday pay provision (95.451) (81.801)Vacation pay liability expenses (73.894) (1.341.519)Other (4.617.416) (6.929.298)
(63.045.160) (44.990.803)
1 January -31 December
2018
1 January -31 December
2017Cost of goods sold (40.148.853) (35.246.122)General administrative expenses (2.191.232) (1.276.059)
Depreciation and amortization (42.340.085) (36.522.181)
Cost of goods sold (169.141.380) (149.232.732)General administrative expenses (37.427.086) (20.920.409)Research and development expenses (619.282) (2.671.603)Marketing expenses (1.064.606) (1.006.991)
Personel giderleri (208.252.354) (173.831.735)
1 January -31 December
2018
1 January -31 December
2017Foreign exchange gain on other operating income
45.221.620 6.942.078
Reversal of impairment on receivables (Note 6) 4.221.694 2.877.361Late payment incomes 4.187.757 --Insurance damage income 1.664.454 941.632Other 5.381.176 4.897.123
60.676.701 15.658.194
55
Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provisions for taxes, as reflected in these consolidated financial statements, have been calculated on an individual-entity basis.
In Turkey corporate tax rate for the fiscal year 2018 is 22% (2017: 20%). Corporate tax rate for the subsidiary of the Group in United Kingdom is 20% (2017: 20%). In accordance with the “Law on the Amendment of Certain Tax Acts and Some Other Laws” numbered 30261 and published in Official Gazette on 5 December 2017; the corporate tax rate for the years 2018, 2019 and 2020 has been increased from 20% to 22%. Therefore, deferred tax assets and liabilities as of 31 December 2017 are calculated with 22% tax rate for the temporary differences that will be realised in 2018, 2019 and 2020; and with 20% tax rate for the temporary differences that will be realised after 2021 and onwards.
The corporate tax rate applies to the tax base that will be found as a result of the deduction of the expenses that are not accepted as a result of the tax laws to the commercial income of the institutions, the exception to the tax law (participation earnings exception, exemption of investment allowance etc.) and the reduction of discounts (such as R & D discount). No further tax is paid if the profit is not distributed.
Corporations are required to pay advance corporation tax quarterly at the rate of 22% on their corporate income and declare by the 14th of the second month following the quarter (31 December 2017: 20%). With the amendment of the law, this rate was determined as 22% for the years 2018, 2019 and 2020.
Advance tax is payable by the 17th of the second month following each calendar quarter end. Advance tax paid by corporations is credited against the annual corporation tax liability. The balance of the advance tax paid may be refunded or used to set off against other liabilities to the government.
Under the Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to 5 years. Tax losses can not be carried back to offset profits from previous periods.
In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns until 25th of the fourth month following the end of the financial year to which they relate. Tax returns are open for 5 years starting from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.
Taxation expenses recognized in the consolidated statements of profit or loss and other comprehensive income for the years ended 31 December 2018 and 31 December 2017 are as follows:
Deferred tax:
The Group recognizes deferred tax assets and liabilities based on temporary differences arising between tax bases of assets and liabilities and their carrying values in the consolidated financial statements, using the currently enacted tax rates. The tax rate applied to temporary differences is 20% (31 December 2018: 20%). With the new amendment to the law this rate has been increased to %22 for the years of 2018, 2019 and 2020. The tax rate applied to the Group’s subsidiary in United Kingdom is 20% (31 December 2016: 20%).
Other operating expenses
For the years ended 31 December, details of other operating expenses were as follows:
23. INCOME FROM INVESTING ACTIVITIES
For the years ended 31 December, details of income from investing activities were as follows:
24. FINANCE INCOME
For the years ended 31 December, details of financial income were as follows:
25. FINANCE COSTS
For the years ended 31 December, details of financial costs were as follows:
26. TAX ASSETS AND LIABILITIES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES)
As at 31 December 2017 and 31 December 2016, prepaid tax and income tax payable were comprised of the following:
1 January -31 December
2018
1 January -31 December
2017Foreign exchange losses on other operating expenses
(4.905.877) (17.571.191)
Rework expenses (*) (1.304.608) (899.808)Rediscount interest expense (1.051.817) (398.389)Tax penalty expense (318.558) --Provision for doubtful receivables -- (2.352.306)Other (65.739) (782.633)
(7.646.599) (22.004.327) (*) Rework expenses consist of recovery invoices issued as a result of rescue opera-tions carried out by the customers of the Group.
1 January -31 December
2018
1 January -31 December
2017Gain on sale of property, plant and equipment 5.545.400 34.634Interest income -- 2.366.930
5.545.400 2.401.564
1 January -31 December
2018
1 January -31 December
2017Foreign exchange gain 17.875.899 8.070.387Interest income 154.058 --
18.029.957 8.070.387
1 January -31 December
2018
1 January -31 December
2017
Interest expenses (59.082.180) (42.560.210)Foreign exchange losses (35.586.594) (14.477.165)Loan expenses (7.940.548) (1.860.609)Employee termination interest expense (4.739.358) (3.470.692)Finance leasing interest expenses (1.196.219) (1.521.427)Factoring expenses (42.425) (2.873.317)Other (2.538.374) (5.119.750)
(111.125.698) (71.883.170)
31 December 2018
31 December 2017
Prepaid taxes -- (919.103)
Prepaid tax -- (919.103)
1 January -31 December
2018
1 January -31 December
2017Current tax income/(expense) -- 671.484Deferred tax income/(expense) (8.656.716) (9.736.171)
Total tax income / (expense) (8.656.716) (9.064.687)
56
CONSOLIDATED FINANCIAL STATEMENTS
Cumulative Temporary Differences Deferred Tax Assets/(Liabilities)31 December
201831 December
201731 December
201831 December
2017Net difference between the tax base and the carrying valueof property, plant and equipment and intangibles 250.158.612 174.514.228 (50.031.722) (34.902.845)Revaluation fund for land 116.112.421 95.134.036 (23.222.484) (19.026.809)Revaluation fund for land improvements and buildings 4.687.349 (11.076.956) (937.470) 553.848Provision for employment termination benefits andnotification payments (51.350.736) (35.016.819) 10.270.147 7.003.363
Net difference between the tax base and carrying value of inventories 1.779.001 448.746 (355.800) (89.749)Timing differences in recognition of revenue (1.385.330) (6.262.915) 277.066 1.252.583Legal provisions (15.906.500) (12.443.682) 3.181.300 2.488.736Provision for doubtful receivables (11.233.975) (311.482) 2.246.795 62.296Investment incentives (*) 26.957.912 26.957.912 26.957.912 26.957.912Other (21.972.212) (20.733.708) 4.394.442 4.146.742
Deferred tax liabilities - net (27.219.814) (11.553.923)
(*) The amount stems from investments held for factory building, field and production facility located in the Manisa Industrial Zone. The Group has received an Incentive Certificate from the Ministry of Economics General Directorate of Incentive Implementation and Foreign Capital for their investment in total amount of TL 80,660,000 starting in May 2015, which will end in May 2018. According to this certificate, tax discount rate is set at 70% and investment contribution rate at 40%. Based on the Investment Promotion Legislation and Article 15 of the Council of Ministers Resolution, costs of land, royalty, spare parts and costs of other expenses whichare not subject to amortization will not benefit from tax support. In this context, total capital expenditure that may be subject to tax deductions is TL 72.579.690 excluding the land and other expenditures. The amount that can be used in discounted corporate tax is calculated through the capital expenditure amounting to TL 77.785.256 in the current period by using the 40% of investment contribution rate amounting TL 31.114.102. Since TL 4.156.190 of this amount is deducted in the calculation of corporate tax of year 2016, the remainingamount of TL 26.957.912 is recorded as deferred tax asset.
2018 2017
1 January (11.553.923) (548.201)Current period deferred tax income/(expense) (8.656.716) (9.736.171)Charged to equity 7.576.137 1.196.991Foreign currency translation differences (14.585.312) (2.466.542)
31 December (27.219.814) (11.553.923)
% 2018 % 2017Income/(loss) before tax rate 109.887.589 77.192.461Tax expense/(income) calculated at legal tax rate 22,00 24.175.270 20,00 15.438.492Effect of share of equity-accounted investee 0,03 33.132 0,07 56.812Effect of disallowable expenses (1,04) (1.146.846) (0,89) (690.443)Effect of tax exemptions 1,45 1.596.526 0,83 642.576Unrecognized deferred tax assets of the current year losses (*) (11,64) (12.785.871) -- --Effect of tax rate change (0,79) (865.672) -- --Tax incentives -- -- (4,32) (3.330.987)Foreign currency translation differences (2,14) (2.349.823) (3,95) (3.051.763)
Tax provisions 7,88 8.656.716 11,74 9.064.687
(*) The Group has financial loss amounting to TL 58.117.596 which has been realized in the current period and the deferred tax has not been calculated.
The composition of cumulative temporary differences and the related deferred tax assets and liabilities calculated using the enacted tax rates at 31 December 2018 and 31 December 2017, were as follows:
The reconciliation of the taxation on income in the consolidated statement of profit or loss and other comprehensive income for the periods ended 31 December and the taxation on income/expenses calculated with the current tax rate over income from continuing operations before tax were as follows:
Movements of deferred tax liability are as follows:
27. EARNINGS/(LOSS) PER SHARE
For the periods 1 January - 31 December 2018 and 1 January - 31 December 2017, weighted average number of shares and earnings/ (loss) per share are as follows:
2018 2017
Average number of shares outstanding during the period (full value) 6.684.480.000 6.684.480.000
Net profit of the Parent Company 101.230.873 68.127.774
Earnings per share with nominal value of 1 KR 15,1442 10,1919
57
28. RELATED PARTY DISCLOSURES
Related parties of the Group are the Componenta Oyj Group until 12 October 2017. As explained in Note 1, the Company’s shares have been transferred to Döktaş as at 12 October 2017 and then related shares were transferred to Çelik Holding A.Ş. as at 29 June 2018.
a) Due from related parties:
As of 31 December 2018, the Group has no receivables from related parties. As at 31 December 2017, trade receivables amounting to TL 83.579.102, which are not considered due to the restructuring of the group companies in the related countries, are accounted under other equity items under shareholders’ equity.
b) Due to related parties:
As at 31 December 2018 and 31 December 2017 trade payables due to related parties was as follows:
c) Sales to related parties:
As of 31 December 2018, there are no sales to related parties.
For the year ended 31 December 2017 breakdown of sales to related parties are as follows:
d) Goods and services purchased:
For the year ended 31 December 2018 breakdown of the purchases from related parties was as follows:
e) Financing expense:
Financial expenses from related parties for the years ended 31 December 2018 and 2017 were as follows:
f) Remunerations to key management personnel:
Key management personnel include general manager and directors and remunerations provided to key management personnel were as follows:
For the year ended 31 December 2017 breakdown of the purchases from related parties was as follows:
31 December 2018
31 December 2017
Bordo Elektrik Enerjisi A.Ş. 5.476.035 --Parsan Makine Parçaları Sanayi A.Ş. 1.236.514 --Kumsan 201.405 238.329Mogan Özel Havacılık A.Ş. 139.972 --Güriş İş Makinaları Endüstri A.Ş. 4.561 --
7.058.487 238.329
1 January - 31 December 2018
1 January - 31 December 2017
Omtaş Otomotiv Sanayi ve Ticaret A.Ş. 230.644 --
230.644 --
1 January - 31 December 2018
1 January - 31 December 2017
Short-term benefits 5.847.336 4.568.454Long-term benefits 416.656 144.402
Total 6.263.993 4.712.856
Trade Goods Model Service TotalComponenta Främmestad AB 90.515.921 116.327 -- 90.632.248
--90.515.921 116.327 90.632.248
Trade Goods Management Service Other TotalBordo Elektrik Enerjisi A.Ş. 20.256.239 -- -- 20.256.239Parsan Makine Parçaları Sanayi A.Ş. -- 1.093.696 452.074 1.545.770Kumsan 1.121.667 -- -- 1.121.667Mogan Özel Havacılık A.Ş. -- -- 461.298 461.298Güriş İş Makinaları Endüstri A.Ş. -- -- 25.783 25.783
21.377.906 1.093.696 939.156 23.410.757
Cost of License Management Service Other TotalComponenta Oyj 2.353.391 -- -- 2.353.391Componenta Pietarsaari -- -- 732.386 732.386Componenta Finland Ltd Pori -- -- 887.512 887.512Componenta Karkkila -- -- 284.696 284.696Componenta Främmestad AB -- -- 35.652 35.652Kumsan -- -- 20.644 20.644
2.353.391 -- 1.960.889 4.314.280
58
CONSOLIDATED FINANCIAL STATEMENTS
31 December 2018 31 December 2017Financial instruments with fixed interest rateCash and cas equivalents 865.000 --Financial liabilities (674.630.050) (156.490.157)
(673.765.050) (156.490.157)
31 December 2018 31 December 2017Financial instruments with variable interest rateFinancial liabilities (340.700.308) (650.859.573)
(340.700.308) (650.859.573)
Receivables 31 December 2018 Trade Receivables Other Receivables
Related Parties Other Parties Related Parties Other PartiesBank
Deposits
Maximum credit risk as at reporting date (*) (A+B+C+D+E) -- 315.722.534 -- 15.921.117 27.696.816 - Guaranteed portion of the maximum risk -- 650.000 -- -- --A. Net book value of the assets that are not due or that are not impaired -- 275.164.620 -- 15.921.117 27.696.816B. Value of the financial assets whose terms have been renegotiated,
otherwise considered as overdue or impaired -- -- -- -- --C. Book value of the overdue but no impaired assets -- 40.557.914 -- -- -- - Secured by collateral, etc. -- -- -- -- --D. Net book value of the assets impaired -- -- -- -- -- - Overdue (gross book value) -- 7.372.015 -- -- -- - impaired (-) -- (7.372.015) -- -- -- - Not due (gross book value) -- 4.883.747 -- -- -- - impaired (-) -- (4.883.747) -- -- --E. Off balance sheet items with credit risk -- -- -- -- --
(*) Increases in credit reliability are not taken into account in determining the amount, such as guarantees received.
Receivables31 December 2017 Trade Receivables Other Receivables
Related Parties Other Parties Related Parties Other PartiesBank
Deposits
Maximum credit risk as at reporting date (*) (A+B+C+D+E) -- 244.823.253 -- 12.024.872 17.445.443 - Guaranteed portion of the maximum risk -- 590.000 -- -- --A. Net book value of the assets that are not due or that are not impaired -- 215.281.026 -- 12.024.872 17.445.443B. Value of the financial assets whose terms have been renegotiated,
otherwise considered as overdue or impaired -- -- -- -- --C. Book value of the overdue but not impaired assets -- 29.542.227 -- -- -- - Guaranteed portion -- -- -- -- --D. Net book value of the assets impaired -- -- -- - Overdue (gross book value) -- 3.955.163 -- -- -- - impaired (-) -- (3.955.163) -- -- -- - Not due (gross book value) -- -- -- -- -- - impaired (-) -- -- -- -- --E. Off balance sheet items with credit risk -- -- -- -- --
(*) Increases in credit reliability are not taken into account in determining the amount, such as guarantees received.
29. CHARACTERISTICS AND LEVEL OF RISKS RESULTING FROM FINANCIAL INSTRUMENTS
The Group’s activities expose it to a variety of financial risks; these risks are market risk (including the effects of changes in debt and equity market prices, foreign currency exchange rates, fair value interest rate risk and cash flow interest rate risk) credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.
a) Interest-rate risk
The Group Management evaluates the interest bearing assets in short-term investment instruments within the framework of the principle of managing with natural measures by balancing the maturities of interest-sensitive assets and liabilities.
Interest rate risk of the Group is derived from financial liabilities which have short and long term maturity.
b) Credit Risk
Ownership of financial assets involves the risk that counterparties may be unable to meet the terms of their agreements. Credit risk of the Group mainly arises from trade receivables and trade receivables consist of domestic and foreign receivables. In case of any collection problem with customers, the Group reduces the credit risk by limiting transactions with related customers. Analysis of credit risk exposed by types of financial instruments as at 31 December 2018 and 2017 is as follows:
59
c) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, providing availability of funds through an adequate amount of committed credit facilities and the ability to close out market positions.
The Group is provided flexibility in funding through available credit lines considering the dynamics of business environment. The Group management holds adequate cash, credit commitment and factoring capacity that will meet the need for cash for 4-weeks in order to manage its liquidity risk.
Remaining maturities of liabilities which includes interest are disclosed in the following page:
d) Foreign Currency Risk
The Group, except the functional currency, is expected to foreign exchange risk due to translation into Euro of TL and other foreign currency denominated assets and liabilities, mainly being TL and other foreign currency denominated trade receivables and bank borrowings. Such risk is monitored in meetings held by the Board of Directors. The Group is maintaining a natural hedge through balancing foreign currency denominated assets and liabilities. Factoring transactions, entered into to manage liquidity risk, are also an important element in maintaining such balance.
31 December 2018 Net BookValue
AgreedTotal Cash
OutflowsLess than3 months
3-12months 1-5 years 5-10 years
Non-derivative financial liabilitiesShort and long term borrowings 999.961.724 1.202.914.794 51.661.808 503.796.191 345.269.810 302.186.985Finance lease liabilities 15.368.634 20.043.971 4.688.232 11.601.424 3.754.315 --Trade payables 94.266.310 94.266.310 94.266.310 -- -- --Other payables 9.926.512 9.926.512 9.440.939 -- 485.573 --Other liabilities 3.351.651 3.351.651 3.351.651 -- -- --
Total 1.122.874.831 1.330.503.238 163.408.940 515.397.615 349.509.698 302.186.985
31 December 2017 Net BookValue
AgreedTotal Cash
OutflowsLess than3 months
3-12months 1-5 years 5-10 years
Non-derivative financial liabilitiesShort and long term borrowings 807.349.730 869.118.920 15.974.744 190.333.437 239.704.968 423.105.771Finance lease liabilities 25.275.768 29.515.817 32.684 11.331.379 18.151.754 --Trade payables 101.317.805 101.317.805 101.317.805 -- -- --Other payables 6.624.947 6.624.947 6.261.210 -- 363.737 --Other liabilities 5.108.446 5.108.446 5.108.446 -- -- --
Total 945.676.696 1.011.685.935 128.694.889 201.664.816 258.220.459 423.105.771
60
CONSOLIDATED FINANCIAL STATEMENTS
DÖVİZ POZİSYONU TABLOSU 31 December 2018 31 December 2017
TL Equivalent(Functional
currency-Euro) USD TL GBP Other
TL Equivalent(Functional
currency-Euro) USD TL GBP Other
1. Trade Receivables 42.099.036 49.031 38.876.476 445.619 -- 24.496.816 293.913 22.716.874 -- --
2a. Monetary Financial Assets (including Cash, Banks accounts) 2.399.491 -- 978.745 213.556 -- 2.145.889 81.450 1.840.632 -- --
2b. Non-monetary Financial Assets -- -- -- -- -- -- -- -- -- --
3. Other 974.092 95.967 441.174 4.215 -- 1.452.167 35.338 1.168.904 24.124 60.000
4. Current Assets (1+2+3) 45.472.619 144.998 40.296.395 663.390 -- 28.094.872 410.701 25.726.410 24.124 60.000
5. Trade Receivables -- -- -- -- -- -- -- -- -- --
6a. Monetary Financial Assets -- -- -- -- -- -- -- -- -- --
6b. Non-monetary Financial Assets -- -- -- -- -- -- -- -- -- --
7. Other -- -- -- -- -- -- -- -- -- --
8. Fixed Assets (5+6+7) -- -- -- -- -- -- -- -- -- --
9. Total Assets (4+8) 45.472.619 144.998 40.296.395 663.390 -- 28.094.872 410.701 25.726.410 24.124 60.000
10. Trade Payables 62.278.713 950.935 55.443.352 269.971 62.500 73.093.791 1.492.023 66.176.240 198.560 128.000
11. Financial Liabilities -- -- -- -- -- 5.783.108 8.778 -- -- --
12a. Other Monetary Liabilities (14.206.155) -- -- (2.135.365) -- (9.015.896) -- -- (1.774.678) --
12b. Other Non-monetary Liabilities -- -- -- -- -- -- -- -- -- --
13. Short-term Liabilities (10+11+12) 48.072.558 950.935 55.443.352 (1.865.394) 62.500 69.861.003 1.500.800 66.176.240 (1.576.118) 128.000
14. Trade Payables -- -- -- -- -- -- -- -- -- --
15. Financial Liabilities -- -- -- -- -- -- -- -- -- --
16a. Other Monetary Liabilities -- -- -- -- -- -- -- -- -- --
16b. Other Nonmonetary Liabilities -- -- -- -- -- -- -- -- -- --
17. Long-term Liabilities (14+15+16) -- -- -- -- -- -- -- -- -- --
18. Total Liabilities (13+17) 48.072.558 950.935 55.443.352 (1.865.394) 62.500 69.861.003 1.500.800 66.176.240 (1.576.118) 128.000
19. Net Asset / (Liability) Position of the Off- Balance Sheet Foreign Exchange Based Derivatives (19a-19b) -- -- -- -- -- -- -- -- -- --
19a. The Amount of the Asset Type Off-Balance-Sheet Foreign Exchange Based Derivatives -- -- -- -- -- -- -- -- -- --
19b. The Amount of the Liability Type Off-Balance-Sheet Foreign Exchange Based Derivatives -- -- -- -- -- -- -- -- -- --
20. Net Foreign Exchange Asset/ (Liability) (9-18+19) (2.599.939) (805.937) (15.146.957) 2.528.784 (62.500) (41.766.131) (1.090.099) (40.449.830) 1.600.242 (68.000)
21. Net Foreign Exchange Asset / (Liability) Position of the Monetary Item(TFRS 7.B23) (=1+2a+5+6a-10-11-12a-14-15-16) (2.599.939) (805.937) (15.146.957) 2.528.784 (62.500) (41.766.131) (1.090.099) (40.449.830) 1.600.242 (68.000)
The table below summarizes the Group’s foreign currency position as at 31 December 2018 and 2017. Carrying values of foreign currency denominated assets and liabilities held by the Group are as follows:
29. CHARACTERISTICS AND LEVEL OF RISKS RESULTING FROM FINANCIAL INSTRUMENTS (continued)
61
29. CHARACTERISTICS AND LEVEL OF RISKS RESULTING FROM FINANCIAL INSTRUMENTS (continued)
Profit/ Loss Shareholder’s Equity (*)
31 December 2018 Appreciation ofForeign Currency
Depreciation ofForeign Currency
Appreciation ofForeign Currency
Depreciation ofForeign Currency
10% change in USD against EUR / in case of depreciation
1 - USD net asset/liability (70.338) 70.338 (70.338) 70.338
2- Hedged from the USD risk (-) -- -- -- --
3-USD Net Effect (1+2) (70.338) 70.338 (70.338) 70.338
10% change in TL against EUR / in case of depreciation
4 -TL net asset/liability (251.277) 251.277 (251.277) 251.277
5 - Hedged from the TL risk (-) -- -- -- --
6- TL Net Effect (4+5) (251.277) 251.277 (251.277) 251.277
10% change in GBP against EUR / in case of depreciation
7- GBP net asset/liability 279.089 (279.089) 279.089 (279.089)
8- Hedged from the GBP risk (-) -- -- -- --
9- GBP Net Effect (7+8) 279.089 (279.089) 279.089 (279.089)
% 10 change in other currency against EUR / in case of depreciation
10- Other currency net asset/liability (5.532) 5.532 (5.532) 5.532
11- Hedged from the other currency risk (-) -- -- -- --
12- Other Net Effect (10+11) (5.532) 5.532 (5.532) 5.532
TOTAL (3 + 6 +9+12) (48.057) 48.057 (48.057) 48.057
(*) Does not include profit/loss effects.
Profit/ Loss Shareholder’s Equity (*)
31 December 2017 Appreciation ofForeign Currency
Depreciation ofForeign Currency
Appreciation ofForeign Currency
Depreciation ofForeign Currency
10% change in USD against EUR / in case of depreciation - -
1 - USD net asset/liability (91.058) 91.058 (91.058) 91.058
2- Hedged from the USD risk (-) -- -- -- --
3- USD Net Effect (1+2) (91.058) 91.058 (91.058) 91.058
10% change in TL against EUR / in case of depreciation
4 - TL net asset/liability (895.800) 895.800 (895.800) 895.800
5 - Hedged from the TL risk (-) -- -- -- --
6- TL Net Effect (4+5) (895.800) 895.800 (895.800) 895.800
10% change in GBP against EUR / in case of depreciation
7- GBP net asset/liability 180.040 (180.040) 180.040 (180.040)
8- Hedged from the GBP risk (-) -- -- -- --
9- GBP Net Effect (7+8) 180.040 (180.040) 180.040 (180.040)
% 10 change in other currency against EUR / in case of depreciation
10- Other currency net asset/liability (5.805) 5.805 (5.805) 5.805
11- Hedged from the other currency risk (-) -- -- -- --
12- Other Net Effect (10+11) (5.805) 5.805 (5.805) 5.805
TOTAL (3 + 6 +9+12) (812.623) 812.623 (812.623) 812.623
(*) Does not include profit/loss effects.
62
CONSOLIDATED FINANCIAL STATEMENTS
31 December 2018
31 December 2017
Financial liabilities 1.015.330.358 807.349.730Less: Cash and cash equivalents (Note 4) (27.741.417) (17.464.098)Net financial liabilities 987.588.941 789.885.632Total equity 128.883.583 47.639.757
Financial liabilities/equity ratio %766 %1.658
31 December 2018 31 December 2017
Net carrying value Fair value Net carrying value Fair valueFinancial assetsCash and cash equivalents 27.741.417 27.741.417 17.464.098 17.464.098Trade receivables 315.722.534 315.722.534 244.823.253 244.823.253Other receivables 15.921.117 15.921.117 12.024.872 12.024.872 359.385.068 359.385.068 274.312.223 274.312.223
Financial liabilitiesBorrowings 1.015.330.358 1.015.330.358 807.349.730 807.349.730Trade payables 94.266.310 94.266.310 101.317.805 101.317.805Other payables 9.926.512 9.926.512 6.624.947 6.624.947 1.119.523.180 1.119.523.180 915.292.482 915.292.482
e) Price Risk
The Group is exposed to commodity (gray cast iron, aluminium) price risk due to the nature of its business. In order to limit the price risk, the Group makes contracts on fixed prices based on the production capacity estimates performed at the beginning of period.
f) Capital Risk Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When measuring fair value, the Group uses the assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. However, judgment is required to interpret in order to find the fair value, fair value measurements may not reflect the values arising in the current market conditions. The following methods and assumptions were used in determining the fair value of financial assets: The fair values of cash and cash equivalents are considered to approximate their respective carrying values due to their short-term nature. The carrying values of trade receivables and impairment for trade receivables are estimated to be their fair values. Carrying value of variable interest rate loans approximately assumed as fair value.
g) Fair Value
Carrying amounts versus fair values
The fair value and carrying values of financial assets and financial liabilities are as follows:
30. EXPLANATIONS RELATED TO CASH FLOW STATEMENT
For the year ended 31 December 2018, cash flows from operating activities of the Group amounted to TL 58.841.779 (2017: TL 55.682.307 used in operating activities), cash flows used in investment activities amounted to TL 17.552.181 (2017: TL 22.569.427) and cash flows used in financing activities amounted to TL 31.258.082 (2017: 93.298.510 TL from financing activities).
31. EXPLANATIONS RELATED TO STATEMENT OF CHANGES IN EQUITY
For the period ended 31 December 2018, the Group’s shareholders’ equity amounting to TL 128.883.583 (31 December 2017: TL 47.639.757) consists of shareholders’ equity of the parent entity.
32. EVENTS AFTER THE REPORTING PERIOD
None.
29. CHARACTERISTICS AND LEVEL OF RISKS RESULTING FROM FINANCIAL INSTRUMENTS (continued)
The Group monitors capital on the basis of debt/equity ratio. The Group has not set any specific target in regards to this ratio and determines its strategies by evaluating the market conditions and the needs of the Group arising from operations for each period.
64
Trade Registration Number: 1204 / OrhangaziE-mail: [email protected]: www.doktas.com
DÖKTAŞ DÖKÜMCÜLÜK TİCARET VE SANAYİ A.Ş.
Fatih Mah. Gölyolu No: 26
Orhangazi 16801 Bursa / Türkiye
Phone : +90 (224) 573 42 63
Fax : +90 (224) 573 42 73
ORHANGAZİ IRON FOUNDRY BUSINESS UNIT
Fatih Mah. Gölyolu No: 26
16801 Orhangazi Bursa / Türkiye
Phone : +90 224 573 4263 - Fax : +90 224 573 4273
MANİSA ALUMINIUM FOUNDRY BUSINESS UNIT
Organize Sanayi Bölgesi 4.Kısım İsmail Tiryaki Cad. No: 7
45030 Manisa / Türkiye
Phone : +90 236 233 8057 - Fax : +90 236 233 8061
MANİSA WHEELS BUSINESS UNIT
Organize Sanayi Bölgesi Sakarya Cad. No: 9
Manisa / Türkiye
Phone : +90 236 233 8057 - Fax : +90 236 233 8061
DÖKTAŞ TRADING UK LTD.
3 & 4 The Mews, Trent Park, Eastern Avenue,
Lichfield, WS13 6RN, UK.
Phone : +44 1543 443 810 - Fax : +44 1543 444 397
ww
w.d
okta
s.co
m
